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Econometric analysis of realised volatility and its use in estimating stochastic volatility models

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  • Ole E. Barndorff-Nielsen

    ()
    (The Centre for Mathematical Physics and Stochastics (MaPhySto), University of Aarhus)

  • Neil Shephard

    ()
    (Nuffield College, Oxford)

Abstract

The availability of intra-data on the prices of speculative assets means that we can use quadratic variation like measures of activity in financial markets, called realised volatility, to study the stochastic properties of returns. Here we derive the moments and the asymptotic distribution of the realised volatility error - the difference between realised volatility and the actual volatility. These properties can be used to allow us to estimate the parameters of stochastic volatility models.

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File URL: http://www.nuff.ox.ac.uk/Economics/papers/2001/w4/realised.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2001-W4.

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Length: 32pages
Date of creation: 26 Oct 2000
Date of revision: 05 Jul 2001
Handle: RePEc:nuf:econwp:0104

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Web page: http://www.nuff.ox.ac.uk/economics/

Related research

Keywords: Econometrics; Higher order variation; Kalman filter; Leverage; Levy process; OU process; Quarticity; Quadratic variation; Realised volatility; Square root process; Stochastic volatility; Subordination; Superposition.;

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References

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