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Estimation of Volatility Functions in Jump Diffusions Using Truncated Bipower Increments

Kim, Jihyun, Park, Joon and Wang, Bin (2020) Estimation of Volatility Functions in Jump Diffusions Using Truncated Bipower Increments. TSE Working Paper, n. 20-1096, Toulouse

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In the paper, we introduce and analyze a new methodology to estimate the volatility
functions of jump diffusion models. Our methodology relies on the standard kernel
estimation technique using truncated bipower increments. The relevant asymptotics
are fully developed, which allow for the time span to increase as well as the sampling
interval to decrease and accommodate both stationary and nonstationary recurrent
processes. We evaluate the performance of our estimators by simulation and provide
some illustrative empirical analyses.

Item Type: Monograph (Working Paper)
Language: English
Date: May 2020
Place of Publication: Toulouse
Uncontrolled Keywords: nonparametric estimation, jump diffusion, aymptotics, diffusive and jump, volatility functions, Lévy measure, optimal bandwidth, bipower increment, threshold truncation.
JEL Classification: C14 - Semiparametric and Nonparametric Methods
C22 - Time-Series Models
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 05 May 2020 12:32
Last Modified: 05 May 2020 12:32
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