Volatility occupation times

Journal Article

We propose nonparametric estimators of the occupation measure and the occupation density of the diffusion coefficient (stochastic volatility) of a discretely observed Itô semimartingale on a fixed interval when the mesh of the observation grid shrinks to zero asymptotically. In a first step we estimate the volatility locally over blocks of shrinking length, and then in a second step we use these estimates to construct a sample analogue of the volatility occupation time and a kernel-based estimator of its density. We prove the consistency of our estimators and further derive bounds for their rates of convergence. We use these results to estimate nonparametrically the quantiles associated with the volatility occupation measure. © Institute of Mathematical Statistics, 2013.

Full Text

Duke Authors

Cited Authors

  • Li, J; Todorov, V; Tauchen, G

Published Date

  • 2013

Published In

Volume / Issue

  • 41 / 4

Start / End Page

  • 1865 - 1891

International Standard Serial Number (ISSN)

  • 0090-5364

Digital Object Identifier (DOI)

  • 10.1214/13-AOS1135