Bernoulli

  • Bernoulli
  • Volume 17, Number 2 (2011), 781-813.

Nonparametric tests for pathwise properties of semimartingales

Rama Cont and Cecilia Mancini

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Abstract

We propose two nonparametric tests for investigating the pathwise properties of a signal modeled as the sum of a Lévy process and a Brownian semimartingale. Using a nonparametric threshold estimator for the continuous component of the quadratic variation, we design a test for the presence of a continuous martingale component in the process and a test for establishing whether the jumps have finite or infinite variation, based on observations on a discrete-time grid. We evaluate the performance of our tests using simulations of various stochastic models and use the tests to investigate the fine structure of the DM/USD exchange rate fluctuations and SPX futures prices. In both cases, our tests reveal the presence of a non-zero Brownian component and a finite variation jump component.

Article information

Source
Bernoulli, Volume 17, Number 2 (2011), 781-813.

Dates
First available in Project Euclid: 5 April 2011

Permanent link to this document
https://projecteuclid.org/euclid.bj/1302009247

Digital Object Identifier
doi:10.3150/10-BEJ293

Mathematical Reviews number (MathSciNet)
MR2787615

Zentralblatt MATH identifier
1345.62074

Keywords
high frequency data jump processes nonparametric tests quadratic variation realized volatility semimartingale

Citation

Cont, Rama; Mancini, Cecilia. Nonparametric tests for pathwise properties of semimartingales. Bernoulli 17 (2011), no. 2, 781--813. doi:10.3150/10-BEJ293. https://projecteuclid.org/euclid.bj/1302009247


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