WORKING PAPER su ARXIV.org: Diffusion covariation and co-jumps in bidimensional asset price processes with stochastic volatility and infinite activity Lévy jumps

In this paper we consider two processes driven by diffusions and jumps. The jump components are Lévy processes and they can both have finite activity and infinite activity. Given discrete observations we estimate the covariation between the two diffusion parts and the co-jumps. The detection of the co-jumps allows to gain insight in the dependence structure of the jump components and has important applications in finance. Our estimators are based on a threshold principle allowing to isolate the jumps. This work follows Gobbi and Mancini (2006) where the asymptotic normality for the estimator of the covariation, with convergence speed square root of h, was obtained when the jump components have finite activity. Here we show that the speed is square root of h only when the activity of the jump components is moderate.