Functional Relationships Between Price and Volatility Jumps and Their Consequences for Discretely Observed Data

Many prominent continuous-time stochastic volatility models exhibit certain functional relationships between price jumps and volatility jumps. We show that stochastic volatility models like the Ornstein-Uhlenbeck and other continous-time CARMA models as well as continous-time GARCH and EGARCH models all exhibit such functional relations. We investigate the asymptotic behaviour of certain functionals of price and volatility processes for discrete observations of the price process on a grid, which are relevant for estimation and testing problems. MSC2010 Subject Classification: Primary 60G48, 60H30, 91G70 Secondary 62G10, 62M02