Abstract

http://ssrn.com/abstract=1298976
 
 

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Impact of Time-Inhomogeneous Jumps and Leverage Type Effects on Returns and Realised Variances


Almut Veraart


Imperial College London; CREATES

November 10, 2008

CREATES Working Paper No. 2008-57

Abstract:     
This paper studies the effect of time - inhomogeneous jumps and leverage type effects on realised variance calculations when the logarithmic asset price is given by a Levy-driven stochastic volatility model. In such a model, the realised variance is an inconsistent estimator of the integrated variance. Nevertheless it can be used within a quasi-maximum likelihood setup to draw inference on the model parameters. In order to do that, this paper introduces a new methodology for deriving all cumulants of the returns and realised variance in explicit form by solving a recursive system of inhomogeneous ordinary differential equations.

Number of Pages in PDF File: 43

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Date posted: November 11, 2008  

Suggested Citation

Veraart, Almut, Impact of Time-Inhomogeneous Jumps and Leverage Type Effects on Returns and Realised Variances (November 10, 2008). CREATES Working Paper No. 2008-57. Available at SSRN: http://ssrn.com/abstract=1298976 or http://dx.doi.org/10.2139/ssrn.1298976

Contact Information

Almut Veraart (Contact Author)
Imperial College London ( email )
Department of Mathematics
180 Queen's Gate
London, SW7 2AZ
CREATES ( email )
Aarhus University
DK-8000 Aarhus C
Denmark
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