Discussion of jumps catching capability of GARCH-Jump model
MU Nian-guo · Journal of the University of Shanghai for Science and Technology · 2007
A discussion about autoregressive structure in GARCHJump model of DPS(2003) is provided.There will appear data distortion in GARCH-Jump model under two special jump cases and the reason why the jump component and the continuous path data can't be treated equally is illustrated.Limitations of GARCH model in dealing with Jump process is described and how to figure out the distortion is investigated.An idea to modify GARCH-Jump model is presented to decrease the distortion raised up by unconditional jumps.