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Optimal nonparametric range-based volatility estimation

Author

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  • Bollerslev, Tim
  • Li, Jia
  • Li, Qiyuan

Abstract

We present a general framework for optimal nonparametric spot volatility estimation based on intraday range data, comprised of the first, highest, lowest, and last price over a given time-interval. We rely on a decision-theoretic approach together with a coupling-type argument to directly tailor the form of the nonparametric estimator to the specific volatility measure of interest and relevant loss function. The resulting new optimal estimators offer substantial efficiency gains compared to existing commonly used range-based procedures.

Suggested Citation

  • Bollerslev, Tim & Li, Jia & Li, Qiyuan, 2024. "Optimal nonparametric range-based volatility estimation," Journal of Econometrics, Elsevier, vol. 238(1).
    • Handle: RePEc:eee:econom:v:238:y:2024:i:1:s0304407623002646
    DOI: 10.1016/j.jeconom.2023.105548
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    More about this item

    Keywords

    Spot volatility; Nonparametric estimation; Range-based estimation; High-frequency data; Decision theory;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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