Volatility clustering and leverage are two of the most prominent features of the dynamics of asset prices. In order to incorporate these features as well as the typical fat-tails of the return distributions, several types of exponential Levy models with random clocks have been proposed in the literature. In this talk we study the problem of estimating the parameters controlling the jump behavior of the process as well as the underlying random clock. We obtain consistent estimation of the relevant parameters when both the sampling time-horizon and frequency get larger. The performance of the estimators is illustrated by MC simulations and empirically.
Speaker: Jose Figueroa-Lopez, Purdue University