Bernoulli

  • Bernoulli
  • Volume 19, Number 2 (2013), 426-461.

Estimation of the lead-lag parameter from non-synchronous data

M. Hoffmann, M. Rosenbaum, and N. Yoshida

Full-text: Open access

Abstract

We propose a simple continuous time model for modeling the lead-lag effect between two financial assets. A two-dimensional process $(X_{t},Y_{t})$ reproduces a lead-lag effect if, for some time shift $\vartheta\in\mathbb{R} $, the process $(X_{t},Y_{t+\vartheta})$ is a semi-martingale with respect to a certain filtration. The value of the time shift $\vartheta$ is the lead-lag parameter. Depending on the underlying filtration, the standard no-arbitrage case is obtained for $\vartheta=0$. We study the problem of estimating the unknown parameter $\vartheta\in\mathbb{R}$, given randomly sampled non-synchronous data from $(X_{t})$ and $(Y_{t})$. By applying a certain contrast optimization based on a modified version of the Hayashi–Yoshida covariation estimator, we obtain a consistent estimator of the lead-lag parameter, together with an explicit rate of convergence governed by the sparsity of the sampling design.

Article information

Source
Bernoulli, Volume 19, Number 2 (2013), 426-461.

Dates
First available in Project Euclid: 13 March 2013

Permanent link to this document
https://projecteuclid.org/euclid.bj/1363192034

Digital Object Identifier
doi:10.3150/11-BEJ407

Mathematical Reviews number (MathSciNet)
MR3037160

Zentralblatt MATH identifier
06168759

Keywords
contrast estimation discretely observed continuous-time processes Hayashi–Yoshida covariation estimator lead-lag effect

Citation

Hoffmann, M.; Rosenbaum, M.; Yoshida, N. Estimation of the lead-lag parameter from non-synchronous data. Bernoulli 19 (2013), no. 2, 426--461. doi:10.3150/11-BEJ407. https://projecteuclid.org/euclid.bj/1363192034


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