Abstract
We propose a simple continuous time model for modeling the lead-lag effect between two financial assets. A two-dimensional process $(X_{t},Y_{t})$ reproduces a lead-lag effect if, for some time shift $\vartheta\in\mathbb{R} $, the process $(X_{t},Y_{t+\vartheta})$ is a semi-martingale with respect to a certain filtration. The value of the time shift $\vartheta$ is the lead-lag parameter. Depending on the underlying filtration, the standard no-arbitrage case is obtained for $\vartheta=0$. We study the problem of estimating the unknown parameter $\vartheta\in\mathbb{R}$, given randomly sampled non-synchronous data from $(X_{t})$ and $(Y_{t})$. By applying a certain contrast optimization based on a modified version of the Hayashi–Yoshida covariation estimator, we obtain a consistent estimator of the lead-lag parameter, together with an explicit rate of convergence governed by the sparsity of the sampling design.
Citation
M. Hoffmann. M. Rosenbaum. N. Yoshida. "Estimation of the lead-lag parameter from non-synchronous data." Bernoulli 19 (2) 426 - 461, May 2013. https://doi.org/10.3150/11-BEJ407
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