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Correcting spot power variation estimator via Edgeworth expansion

Author

Listed:
  • Lidan He

    (Nanjing University of Information Science and Technology)

  • Qiang Liu

    (Shanghai University of Finance and Economics)

  • Zhi Liu

    (University of Macau)

  • Andrea Bucci

    (University of Macerata)

Abstract

In this paper, we propose an estimator of power spot volatility of order p through Edgeworth expansion. We provide a precise description of how to compute the expansion and the first four cumulants are given in an explicit form. We also construct feasible confidence intervals (one-sided and two-sided) for the pth power spot volatility estimator by using Edgeworth expansion. A Monte Carlo simulation study shows that the confidence intervals and probability density curve based on Edgeworth expansion perform better than the conventional case based on Normal approximation.

Suggested Citation

  • Lidan He & Qiang Liu & Zhi Liu & Andrea Bucci, 2024. "Correcting spot power variation estimator via Edgeworth expansion," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 87(8), pages 921-945, November.
    • Handle: RePEc:spr:metrik:v:87:y:2024:i:8:d:10.1007_s00184-023-00935-z
    DOI: 10.1007/s00184-023-00935-z
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    References listed on IDEAS

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