Microstructure Noise in the Continuous Case: The Pre-Averaging Approach ∗
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In this article, a generalized pre-averaging approach for estimating the integrated volatility is presented, which can generate rate optimal estimators with convergence rate n 1/4. But the convergence rate is not guaranteed.About:
This article is published in Stochastic Processes and their Applications.The article was published on 2009-07-01 and is currently open access. It has received 525 citations till now. The article focuses on the topics: Stochastic volatility & Estimator.read more
Citations
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Bootstrapping integrated covariance matrix estimators in noisy jump–diffusion models with non-synchronous trading
TL;DR: In this paper, the wild blocks of blocks (WBS) method is used to estimate the covariance matrix of a broad class of covolatility estimators, and the bootstrap variance estimator is positive semi-definite by construction.
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Liquidity and volatility in the U.S. Treasury market
TL;DR: In this paper, the joint dynamics of intraday liquidity, volume, and volatility in the U.S. Treasury market, especially through the 2007-09 financial crisis and around important economic announcements, were modeled.
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Trading Price Jump Clusters in Foreign Exchange Markets
TL;DR: In this paper, the authors investigate trading opportunities of price jump clusters in the FX markets and propose a high-frequency jump cluster-based trading strategy and show that jumps carry a tradable signal for all currencies; however, when incorporating the bid-ask spread, the only profitable currencies are the euro, yen and rand.
Posted Content
Estimating the Quadratic Covariation Matrix for an Asynchronously Observed Continuous Time Signal Masked by Additive Noise
Sujin Park,Oliver Linton +1 more
TL;DR: This work proposes a new estimator of multivariate ex-post volatility that is robust to microstructure noise and asynchronous data timing, based on Fourier domain techniques and shows in extensive simulations that the method outperforms the time domain estimator.
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Improving Asset Price Prediction When All Models are False
Garland Durham,John Geweke +1 more
TL;DR: In this article, the authors consider three alternative sources of information about volatility potentially useful in predicting daily asset returns: past daily returns, past intraday returns, and a volatility index based on observed option prices.
References
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A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
TL;DR: In this paper, a closed-form solution for the price of a European call option on an asset with stochastic volatility is derived based on characteristi c functions and can be applied to other problems.
Book
Limit Theorems for Stochastic Processes
Jean Jacod,Albert N. Shiryaev +1 more
TL;DR: In this article, the General Theory of Stochastic Processes, Semimartingales, and Stochastically Integrals is discussed and the convergence of Processes with Independent Increments is discussed.
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Answering the skeptics: yes, standard volatility models do provide accurate forecasts*
TL;DR: In this article, a voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using ARCH and stochastic volatility models and it has been shown that volatility models produce strikingly accurate inter-daily forecasts for the latent volatility factor that would be of interest in most financial applications.
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Modeling and forecasting realized volatility
TL;DR: In this article, the authors provide a general framework for integration of high-frequency intraday data into the measurement, modeling, and forecasting of daily and lower frequency volatility and return distributions.
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A Simple Implicit Measure of the Effective Bid‐Ask Spread in an Efficient Market
TL;DR: In this article, the effective bid-ask spread is measured by Spread = 2−cov where cov is the first-order serial covariance of price changes, and is shown empirically to be closely related to firm size.