Estimation of the stochastic leverage effect using the Fourier transform method |
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Authors: | Imma Valentina Curato |
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Institution: | Ulm University, Institute of Mathematical Finance, Helmholtzstrasse 18, 89069 Ulm, Germany |
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Abstract: | We define a non-parametric estimator of the integrated leverage effect as the integrated covariation between the logarithmic asset price and its volatility. In Curato and Sanfelici (2015), a consistent estimator of the leverage effect has been introduced through a pre-estimate of the Fourier coefficients of the volatility. This is a novel approach compared to the ones present in the literature which use a pre-estimate of the spot volatility path. In this paper, we show the asymptotic normality of the Fourier estimator for non-equidistant observations. Moreover, its finite sample properties are analyzed in a simulation study also in the presence of microstructure noise. |
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Keywords: | 60F05 60H05 Fourier analysis Continuous semi-martingales Leverage effect Non-parametric estimation techniques |
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