Do price and volatility jump together?

Details Do price and volatility jump together? Do price and volatility jump together?

2010-10-21

arxiv.org/abs/1010.4990v1

Annals of Applied Probability 2010, Vol. 20, No. 4, 1425-1469

Economy

Quantitative Finance

Statistical Finance

Published in at http://dx.doi.org/10.1214/09-AAP654 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Inst

Scientific paper

10.1214/09-AAP654

We consider a process $X_t$, which is observed on a finite time interval $[0,T]$, at discrete times $0,\Delta_n,2\Delta_n,\ldots.$ This process is an It\^{o} semimartingale with stochastic volatility $\sigma_t^2$. Assuming that $X$ has jumps on $[0,T]$, we derive tests to decide whether the volatility process has jumps occurring simultaneously with the jumps of $X_t$. There are two different families of tests for the two possible null hypotheses (common jumps or disjoint jumps). They have a prescribed asymptotic level as the mesh $\Delta_n$ goes to $0$. We show on some simulations that these tests perform reasonably well even in the finite sample case, and we also put them in use on S&P 500 index data.

Affiliated with

Also associated with

No associations

Rating

Do price and volatility jump together? does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Do price and volatility jump together?, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Do price and volatility jump together? will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-424171