Global estimation of realized spot volatility in the presence of price jumps

Wale Dare () and Matthias Fengler

No 1715, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: We propose a non-parametric procedure for estimating the realized spot volatility of a price process described by an Itô semimartingale with Lévy jumps. The procedure integrates the threshold jump elimination technique of Mancini (2009) with a frame (Gabor) expansion of the realized trajectory of spot volatility. We show that the procedure converges in probability in L2([0, T]) for a wide class of spot volatility processes, including those with discontinuous paths. Our analysis assumes the time interval between price observations tends to zero; as a result, the intended application is for the analysis of high frequency financial data.

Keywords: Nonparametric estimation; Itô semimartingale; Lévy jumps; Gabor frames; realized spot volatility (search for similar items in EconPapers)
JEL-codes: C13 C14 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2017-09
New Economics Papers: this item is included in nep-ecm and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2017:15

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