- On Estimating The Integrated Co-volatility Using Noisy High Frequency Data with Jumps
- Bing-Yi Jing, Cui-Xia Li, Zhi Liu
- Communication in Statistics-Theory and method
- #002161 20131014 (published)
- In this paper, 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, binfinity activity or even infinity variation. Simulation is also included to illustrate the performance of the proposed procedure.
- Keywords: Ito semi-martingale; High frequency data; Microstructure noise; Covolatility; Jumps; Central limit theorem.
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