Nonparametric estimation of volatility function in the jump-diffusion model with noisy data

Xu-Guo Ye, Yan-Yong Zhao and Kong-Sheng Zhang

Journal of Nonparametric Statistics, 2020, vol. 32, issue 3, 587-616

Abstract: In this article, we propose a two-step approach to estimate the volatility function of a jump-diffusion model in noisy data setting. The preaveraging method and threshold technique is used to remove microstructure noise and jumps, respectively. The newly proposed estimator is shown to be consistent and asymptotically normal. A simulation study and a real data application are undertaken to assess the finite sample performance of the proposed method.

Date: 2020
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DOI: 10.1080/10485252.2020.1759599

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