Three-point approach for estimating integrated volatility and integrated covariance

Applying jump-robust methods to estimating integrated volatility is in the mainstream of financial econometrics. However, little if any attention has been devoted to the construction of a jump-free estimator for integrated covariance that overlooks the well-documented manifestation of joint jumps. Joint jumps are contemporaneous within the day. Therefore, this study proposes a three-point approach that not only deals with estimating volatility, but also constructs a singular-jump-free and joint-jump-free covariance. Since the basic idea of the three-point covariance is based on conditional quantiles, we also provide two alternative procedures for finding approximated estimations in practical applications. Based on this approach, our empirical results confirm that singular jumps and joint jumps occur on the Taiwan Futures Exchange.