Casas, Isabel; Gijbels, Irene - School of Economics and Management, University of Aarhus - 2009
The objective of this paper is to introduce the break preserving local linear (BPLL) estimator for the estimation of unstable volatility functions. Breaks in the structure of the conditional mean and/or the volatility functions are common in Finance. Markov switching models (Hamilton, 1989) and...