Local risk-minimization for Barndorff-Nielsen and Shephard models

Local risk-minimization for Barndorff-Nielsen and Shephard models

Asymptotic analysis for a simple explicit estimator in Barndorff-Nielsen and Shephard stochastic volatility models∗

We provide a simple explicit estimator for discretely observed Barndorff-Nielsen and Shephard models, prove rigorously consistency and asymptotic normality based on the single assumption that all moments of the stationary distribution of the variance process are finite, and give explicit expressions for the asymptotic covariance matrix. We develop in detail the martingale estimating function ap...

Merton’s problem for an investor with a benchmark in a Barndorff-Nielsen and Shephard market

To try to outperform an externally given benchmark with known weights is the most common equity mandate in the financial industry. For quantitative investors, this task is predominantly approached by optimizing their portfolios consecutively over short time horizons with one-period models. We seek in this paper to provide a theoretical justification to this practice when the underlying market i...

Joint analysis and estimation of stock prices and trading volume in Barndorff-Nielsen and Shephard stochastic volatility models

We introduce a variant of the Barndorff-Nielsen and Shephard stochastic volatility model where the non Gaussian Ornstein-Uhlenbeck process describes some measure of trading intensity like trading volume or number of trades instead of unobservable instantaneous variance. We develop an explicit estimator based on martingale estimating functions in a bivariate model that is not a diffusion, but ad...

Averaging tests for jumps

We propose a new procedure to detect jumps in prices in the presence of microstructure noise. The procedure averages the results from existing tests across sampling frequencies. This approach overcomes the sub-sampling and low-power problems that plague existing tests for jumps. We use a modified version of Fisher’s method to combine p-values for the Barndorff-Nielsen and Shephard (2006) test a...