This paper describes a simple yet powerful methodology to decompose asset returns sampled at high frequency into their base components (continuous, small jumps, large jumps), determine the relative magnitude of the components, and analyze the finer characteristics of these components such as the degree of activity of the jumps.

Yacine Aït-Sahalia is the Otto A. Hack ’03 Professor of Finance and Economics and the Director of the Bendheim Center for Finance at Princeton University. His research concentrates on financial econometrics, investments, fixed-income and derivative securities, and has been published in leading academic journals. Professor Aït-Sahalia is a Fellow of the Econometric Society, a Fellow of the Institute of Mathematical Statistics, an Alfred P. Sloan Foundation Research Fellow and a Research Associate for the National Bureau of Economic Research. He is also the recipient of the 1997 Michael Brennan Award, the 1998 Cornerstone Research Award, the 2001 FAME Research Award and the 2003 Dennis J. Aigner Award. He recently served as the Editor of the Review of Financial Studies and serves as an associate editor for Econometrica and the Journal of Finance. He received his Ph.D. in Economics from the Massachusetts Institute of Technology in 1993 and is a graduate of France’s Ecole Polytechnique.