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Change-point inference on volatility in noisy Itô semimartingales

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  • Bibinger, Markus
  • Madensoy, Mehmet

Abstract

This work is concerned with tests on structural breaks in the spot volatility process of a general Itô semimartingale based on discrete observations contaminated with i.i.d.microstructure noise. We construct a consistent test building up on infill asymptotic results for certain functionals of spectral spot volatility estimates. A weak limit theorem is established under the null hypothesis relying on extreme value theory. We prove consistency of the test and of an associated estimator for the change point. A simulation study illustrates the finite-sample performance of the method and efficiency gains compared to a skip-sampling approach.

Suggested Citation

  • Bibinger, Markus & Madensoy, Mehmet, 2019. "Change-point inference on volatility in noisy Itô semimartingales," Stochastic Processes and their Applications, Elsevier, vol. 129(12), pages 4878-4925.
    • Handle: RePEc:eee:spapps:v:129:y:2019:i:12:p:4878-4925
    DOI: 10.1016/j.spa.2018.12.013
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    References listed on IDEAS

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    1. Jacod, Jean, 2008. "Asymptotic properties of realized power variations and related functionals of semimartingales," Stochastic Processes and their Applications, Elsevier, vol. 118(4), pages 517-559, April.
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    1. Bibinger, Markus, 2020. "Cusum tests for changes in the Hurst exponent and volatility of fractional Brownian motion," Statistics & Probability Letters, Elsevier, vol. 161(C).

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