Power and Multipower Variation: inference for high frequency data

Jeannette H. C. Woerner ()
Additional contact information
Jeannette H. C. Woerner: Universität Göttingen, Institut für Mathematische Stochastik

Chapter 12 in Stochastic Finance, 2006, pp 343-364 from Springer

Abstract: Summary In the framework of stochastic volatility models there is a wide range of applications of power, bipower and multipower variation, i.e. the sum of appropriately scaled absolute values of log-returns and neighbouring log-returns raised to a certain power. Given high frequency data we can use the concept of power and multipower variation in the context of model selection, namely to determine if the underlying process possesses a jump component, as well as estimating the integrated volatility both in classical and Lévy type stochastic volatility models. In this paper we will focus on bipower and multipower variation for classical stochastic volatility models. These concepts provide more robustness against jump components for estimators needed for pricing classical variance or volatility swaps. Furthermore, a combination of power and multipower variation can be used to separate the continuous and the jump part of the quadratic variation and hence gives insight in determining whether the classical purely continuous stochastic volatility model is appropriate.

Keywords: Option Price; Stochastic Volatility; Quadratic Variation; Power Variation; Stochastic Volatility Model (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-0-387-28359-3_12

Ordering information: This item can be ordered from
http://www.springer.com/9780387283593

DOI: 10.1007/0-387-28359-5_12

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().