Econometric Analysis of Realized Volatility and its Use in Estimating Stochastic Volatility Models
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- 1 May 2002
- journal article
- research article
- Published by Oxford University Press (OUP) in Journal of the Royal Statistical Society Series B: Statistical Methodology
- Vol. 64 (2) , 253-280
- https://doi.org/10.1111/1467-9868.00336
Abstract
Summary: The availability of intraday data on the prices of speculative assets means that we can use quadratic variation-like measures of activity in financial markets, called realized volatility, to study the stochastic properties of returns. Here, under the assumption of a rather general stochastic volatility model, we derive the moments and the asymptotic distribution of the realized volatility error—the difference between realized volatility and the discretized integrated volatility (which we call actual volatility). These properties can be used to allow us to estimate the parameters of stochastic volatility models without recourse to the use of simulation-intensive methods.Keywords
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Funding Information
- Danish Social Science Research Council
- Centre for Mathematical Physics and Stochastics
- UK's Economic and Social Research Council (R00023839)
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