TY  - JOUR
AU  - Ait-Sahalia,Yacine
TI  - Disentangling Volatility from Jumps
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9915
PY  - 2003
Y2  - August 2003
UR  - http://www.nber.org/papers/w9915
L1  - http://www.nber.org/papers/w9915.pdf
N1  - Author contact info:
Yacine Ait-Sahalia
Department of Economics
Fisher Hall
Princeton University
Princeton, NJ 08544-1021
Tel: 609/258-4015
Fax: 609/258-0719
E-Mail: yacine@princeton.edu
AB  - Realistic models for financial asset prices used in portfolio choice, option pricing or risk management include both a continuous Brownian and a jump components. This paper studies our ability to distinguish one from the other. I find that, surprisingly, it is possible to perfectly disentangle Brownian noise from jumps. This is true even if, unlike the usual Poisson jumps, the jump process exhibits an infinite number of small jumps in any finite time interval, which ought to be harder to distinguish from Brownian noise, itself made up of many small moves.
ER  -