Work

Duration-Based Volatility Estimation

Year: 2009

Type: preprint

Abstract: We develop a novel approach to estimating the integrated variance of a general jump-diffusion with stochastic volatility. Our approach exploits the relationship between the speed (distance traveled per fixed time unit) and passage time (time taken to travel a fixed distance) of the Brownian motion. The new class of duration-based IV estimators derived in this paper is shown to be robust to both jumps and market microstructure noise. Moreover, their asymptotic and finite sample properties compare favorably to those of commonly used robust IV estimators.

Source: RePEc: Research Papers in Economics

Authors: Torben G. Andersen, Dobrislav Dobrev, Ernst Schaumburg

Institution: Northwestern University

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W1548276982

Cites: 28

Cited by: 44

Related to: 10