Motivated by the construction of the Itô stochastic integral, we consider a step function method to discretize and simulate volatility modulated Lévy semistationary processes. Moreover, we assess the accuracy of the method with a particular focus on integrating kernels with a singularity at...

We address the issue of modelling and forecasting macroeconomic variables using medium and large datasets, by adopting VARMA models. We overcome the estimation issue that arises with this class of models by implementing an iterative ordinary least squares (IOLS) estimator. We establish the...

Recent research has focused on modelling asset prices by Itô semimartingales. In such a modelling framework, the quadratic variation consists of a continuous and a jump component. This paper is about inference on the jump part of the quadratic variation, which can be estimated by the difference...

This paper presents some limit theorems for certain functionals of moving averages of semimartingales plus noise, which are observed at high frequency. Our method generalizes the pre-averaging approach (see [13],[11]) and provides consistent estimates for various characteristics of general...

This paper studies the effect of time–inhomogeneous jumps and leverage type effects on realised variance calculations when the logarithmic asset price is given by a Lévy–driven stochastic volatility model. In such a model, the realised variance is an inconsistent estimator of the integrated...

We consider a new class of estimators for volatility functionals in the setting of frequently observed Itô diffusions which are disturbed by i.i.d. noise. These statistics extend the approach of pre-averaging as a general method for the estimation of the integrated volatility in the presence of...

We show that the compensation for rare events accounts for a large fraction of the equity and variance risk premia in the S&P 500 market index. The probability of rare events vary significantly over time, increasing in periods of high market volatility, but the risk premium for tail events...

The variance risk premium, defined as the difference between actual and risk-neutralized expectations of the forward aggregate market variation, helps predict future market returns. Relying on new essentially model-free estimation procedure, we show that much of this predictability may be...

Motivated by the implications from a stylized equilibrium pricing framework, we investigate empirically how individual equity prices respond to continuous, or \smooth," and jumpy, or \rough," market price moves, and how these different market price risks, or betas, are priced in the...

In this paper we present the asymptotic theory for spectral distributions of high dimensional covariation matrices of Brownian diffusions. More specifically, we consider N-dimensional Itô integrals with time varying matrix-valued integrands. We observe n equidistant high frequency data points...