Modified weighted power variations of the Hermite process and applications to integrated volatility
Abstract
We study the asymptotic behaviour of modified weighted power variations of the Hermite process of arbitrary order. By selecting suitable "good" increments and exploiting their decomposition into dominant independent components, we establish a central limit theorem for weighted $p$-variations using tools from Stein-Malliavin calculus. Our results extend previous works on modified quadratic and wavelet-based variations to general powers and to weighted settings, with explicit bounds in Wasserstein distance. We further apply these limit theorems to construct asymptotically Gaussian estimators of integrated volatility in Hermite-driven models, thereby extending fBm-based methods to non-Gaussian settings. The last part of our work contains numerical simulations which illustrate the practical performance of the proposed estimators.
Fields of Study & Subjects
Financial Risk and Volatility Modeling
Stochastic processes and financial applications
Random Matrices and Applications
Publication details
- Journal / source
- arXiv (Cornell University)
- Publication date
- 5 January 2026
- Document type
- Preprint