Do price and volatility jump together?
Abstract
We consider a process , which is observed on a finite time interval , at discrete times This process is an It\^{o} semimartingale with stochastic volatility . Assuming that has jumps on , we derive tests to decide whether the volatility process has jumps occurring simultaneously with the jumps of . There are two different families of tests for the two possible null hypotheses (common jumps or disjoint jumps). They have a prescribed asymptotic level as the mesh goes to . We show on some simulations that these tests perform reasonably well even in the finite sample case, and we also put them in use on S&P 500 index data.
Keywords
Cite
@article{arxiv.1010.4990,
title = {Do price and volatility jump together?},
author = {Jean Jacod and Viktor Todorov},
journal= {arXiv preprint arXiv:1010.4990},
year = {2010}
}
Comments
Published in at http://dx.doi.org/10.1214/09-AAP654 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)