Abstract
It is generally accepted that the asset price processes contain jumps. In fact, pure jump models have been widely used to model asset prices and/or stochastic volatilities. The question is: is there any statistical evidence from the high-frequency financial data to support using pure jump models alone? The purpose of this paper is to develop such a statistical test against the necessity of a diffusion component. The test is very simple to use and yet effective. Asymptotic properties of the proposed test statistic will be studied. Simulation studies and some real-life examples are included to illustrate our results.
Citation
Bing-Yi Jing. Xin-Bing Kong. Zhi Liu. "Modeling high-frequency financial data by pure jump processes." Ann. Statist. 40 (2) 759 - 784, April 2012. https://doi.org/10.1214/12-AOS977
Information