On the estimation of integrated volatility in the presence of jumps and microstructure noise

Authors: Christian Brownlees, Eulàlia Nualart and

Econometric Reviews, Vol. 39, No 10, December, 2020

This paper is concerned with the problem of the estimation of the integrated volatility of log-prices based on high frequency data when both price jumps and market microstructure noise are present. We begin by providing a survey of the leading estimators introduced in the literature to tackle volatility estimation in this setting. We then introduce novel integrated volatility estimators based on a truncation technique and establish their properties. Finally, we carry out a simulation study to compare the performance of the different estimation techniques.