Economics at your fingertips  

Asymptotic Expansions for High-Frequency Option Data

Carsten H. Chong and Viktor Todorov

Papers from

Abstract: We derive a nonparametric higher-order asymptotic expansion for small-time changes of conditional characteristic functions of It\^o semimartingale increments. The asymptotics setup is of joint type: both the length of the time interval of the increment of the underlying process and the time gap between evaluating the conditional characteristic function are shrinking. The spot semimartingale characteristics of the underlying process as well as their spot semimartingale characteristics appear as leading terms in the derived asymptotic expansions. The analysis applies to a general class of It\^o semimartingales that includes in particular L\'evy-driven SDEs and time-changed L\'evy processes. The asymptotic expansion results are of direct use for constructing nonparametric estimates pertaining to the stochastic volatility dynamics of an asset from high-frequency data of options written on the underlying asset.

Date: 2023-04
New Economics Papers: this item is included in nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) Latest version (application/pdf)

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:

Access Statistics for this paper

More papers in Papers from
Bibliographic data for series maintained by arXiv administrators ().

Page updated 2023-07-22
Handle: RePEc:arx:papers:2304.12450