A Central Limit Theorem for Realised Power and Bipower Variations of Continuous Semimartingales

Ole Barndorff-Nielsen, Svend Erik Graversen, Jean Jacod, Mark Podolskij () and Neil Shephard ()
Additional contact information
Svend Erik Graversen: University of Aarhus
Jean Jacod: Universtie P. et M. Curie

No 2004-W29, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: Consider a semimartingale of the form Y_{t}=Y_0+\int _0^{t}a_{s}ds+\int _0^{t}_{s-} dW_{s}, where a is a locally bounded predictable process and (the "volatility") is an adapted right--continuous process with left limits and W is a Brownian motion. We define the realised bipower variation process V(Y;r,s)_{t}^n=n^{((r+s)/2)-1} \sum_{i=1}^{[nt]}|Y_{(i/n)}-Y_{((i-1)/n)}|^{r}|Y_{((i+1)/n)}-Y_{(i/n)}|^{s}, where r and s are nonnegative reals with r+s>0. We prove that V(Y;r,s)_{t}n converges locally uniformly in time, in probability, to a limiting process V(Y;r,s)_{t} (the "bipower variation process"). If further is a possibly discontinuous semimartingale driven by a Brownian motion which may be correlated with W and by a Poisson random measure, we prove a central limit theorem, in the sense that \sqrt(n) (V(Y;r,s)^n-V(Y;r,s)) converges in law to a process which is the stochastic integral with respect to some other Brownian motion W', which is independent of the driving terms of Y and \sigma. We also provide a multivariate version of these results.

Pages: 35 pages
Date: 2004-11-01
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (28)

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Related works:
Working Paper: A Central Limit Theorem for Realised Power and Bipower Variations of Continuous Semimartingales (2004)
Working Paper: A central limit theorem for realised power and bipower variations of continuous semimartingales (2004)
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