On Estimating the Integrated Co-Volatility Using Noisy High-Frequency Data with Jumps |
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Authors: | Bing-Yi Jing Cui-Xia Li |
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Institution: | 1. School of Mathematics and Statistics , Lanzhou University , Lanzhou , China;2. Department of Mathematics , Hong Kong University of Science and Technology , Clear Water Bay , Hong Kong;3. School of Mathematics and Statistics , Lanzhou University , Lanzhou , China |
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Abstract: | In this article, we consider the estimation of covariation of two asset prices which contain jumps and microstructure noise, based on high-frequency data. We propose a realized covariance estimator, which combines pre-averaging method to remove the microstructure noise and the threshold method to reduce the jumps effect. The asymptotic properties, such as consistency and asymptotic normality, are investigated. The estimator allows very general structure of jumps, for example, infinity activity or even infinity variation. Simulation is also included to illustrate the performance of the proposed procedure. |
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Keywords: | Central limit theorem Co-volatility High-frequency data Ito semi-martingale Jumps Microstructure noise |
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