Bias Correction Estimation for Continuous-Time Asset Return Model with Jumps

02/14/2018

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by   Yuping Song, et al.

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In this paper, local linear estimators are adapted for the unknown infinitesimal coefficients associated with continuous-time asset return model with jumps, which can correct the bias automatically due to their simple bias representation. The integrated diffusion models with jumps, especially infinite activity jumps are mainly investigated. In addition, under mild conditions, the weak consistency and asymptotic normality is provided through the conditional Lindeberg theorem. Furthermore, our method presents advantages in bias correction through simulation whether jumps belong to the finite activity case or infinite activity case. Finally, the estimators are illustrated empirically through the returns for stock index under five-minute high sampling frequency for real application.