A Feasible Central Limit Theory for Realised Volatility Under Leverage

Nuffield College Economics Working Paper No. 2004-W3

Posted: 3 Feb 2004

See all articles by Ole E. Barndorff-Nielsen

Ole E. Barndorff-Nielsen

University of Aarhus - Thiele Centre, Department of Mathematical Sciences

Neil Shephard

Harvard University

Date Written: January 14, 2004

Abstract

In this note we show that the feasible central limit theory for realised volatility and realised covariation recently developed by Barndorff-Nielsen and Shephard applies under arbitrary diffusion based leverage effects. Results from a simulation experiment suggest that the feasible version of the limit theory performs well in practice.

Keywords: Euler approximation, Functional central limit theory, Quadratic variation, Realised volatility, Stochastic volatility

JEL Classification: C14, C22, G12

Suggested Citation

Barndorff-Nielsen, Ole E. and Shephard, Neil, A Feasible Central Limit Theory for Realised Volatility Under Leverage (January 14, 2004). Nuffield College Economics Working Paper No. 2004-W3. Available at SSRN: https://ssrn.com/abstract=492502

Ole E. Barndorff-Nielsen

University of Aarhus - Thiele Centre, Department of Mathematical Sciences ( email )

Ny Munkegade
Aarhus, DK 8000
Denmark

Neil Shephard (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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