How accurate is the asymptotic approximation to the distribution of realised volatility?

Abstract

In this paper we study the reliability of the mixed normal asymptotic distribution of realised volatility error, which we have previously derived using the theory of realised power variation. Our experiments suggests that the asymptotics is reliable when we work with the logarithmic transform of the realised volatility.Levy process; Mixed Gaussian limit; OU process; Quadratic variation; Realised power variation; Realised volatility; Square root process; Stochastic volatility; Superposition.