Recovering Brownian and jump parts from high-frequency observations of a L\'evy process

Abstract

We introduce two general non-parametric methods for recovering paths of the Brownian and jump components from high-frequency observations of a L\'evy process. The first procedure relies on reordering of independently sampled normal increments and thus avoids tuning parameters. The functionality of this method is a consequence of the small time predominance of the Brownian component, the presence of exchangeable structures, and fast convergence of normal empirical quantile functions. The second procedure amounts to filtering the increments and compensating with the final value. It requires a carefully chosen threshold, in which case both methods yield the same rate of convergence. This rate depends on the small-jump activity and is given in terms of the Blumenthal-Getoor index. Finally, we discuss possible extensions, including the multidimensional case, and provide numerical illustrations.