Consistent Estimation of Integrated Volatility Using Intraday Absolute Returns for SV Jump Diffusion Processes

In this paper, we consider an integrated volatility estimation of a stochastic volatility jump diffusion model using intraday absolute returns. We introduce our estimator as a natural extension of realized absolute variation, proposed by Barndorff-Nielsen and Shephard (2003), and show its consistency and asymptotic normality. We also show our estimator is asymptotically more efficient than another jump-robust estimator, bi-power variation, proposed by Barndorff-Nielsen and Shephard (2004, 2006). The results of a simulation to assess the finite-sample behavior of our estimator compliment the asymptotic result.