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Functional data analysis for volatility

Listed author(s):
  • Müller, Hans-Georg
  • Sen, Rituparna
  • Stadtmüller, Ulrich
Registered author(s):

    We introduce a functional volatility process for modeling volatility trajectories for high frequency observations in financial markets and describe functional representations and data-based recovery of the process from repeated observations. A study of its asymptotic properties, as the frequency of observed trades increases, is complemented by simulations and an application to the analysis of intra-day volatility patterns of the S&P 500 index. The proposed volatility model is found to be useful to identify recurring patterns of volatility and for successful prediction of future volatility, through the application of functional regression and prediction techniques.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304407611001606
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    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 165 (2011)
    Issue (Month): 2 ()
    Pages: 233-245

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    Handle: RePEc:eee:econom:v:165:y:2011:i:2:p:233-245
    DOI: 10.1016/j.jeconom.2011.08.002
    Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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