Robustified Gaussian quasi-BIC for volatility

Abstract

We develop a theoretical foundation for robust model comparison in a class of non-ergodic continuous volatility regression models contaminated by finite-activity jumps. Using the density-power weighting and the Hölder(-inequality)-based normalization of the conventional Gaussian quasi-likelihood function, we propose two Schwarz-type statistics and also establish their model selection consistency with respect to the minimal true parametric volatility coefficient. Numerical experiments are conducted to illustrate our theoretical findings.