Yingying Fan (Marshall School of Business, USC)

Title : Testing and Detecting Jumps Based on a Discretely Observed Process

Abstract: We propose a new nonparametric test for detecting the presence of jumps in asset prices using discretely observed data. Compared with the test statistic in A\"{i}t-Sahalia and Jacod (2007), our new test statistic enjoys the same asymptotic properties but has smaller variance. These results are justified both theoretically and numerically. Thanks to the reduction of the variance, we also propose a new test procedure to identify the locations of jumps. The problem of jump identification thus reduces to a multiple comparison problem. We employ the False Discovery Rate (FDR) approach to control the type I error. Simulation studies and real data analysis further demonstrate the power of the newly proposed test method. This is a joint work with Professor Jianqing Fan.