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Nonparametric Filtering of the Realised Spot Volatility: A Kernel-based Approach

  • Dennis Kristensen

    ()

    (School of Economics and Management, University of Aarhus, Denmark)

A kernel weighted version of the standard realised integrated volatility es- timator is proposed. By different choices of the kernel and bandwidth, the measure allows us to focus on specific characteristics of the volatility process. In particular, as the bandwidth vanishes, an estimator of the realised spot volatility is obtained. We denote this the filtered spot volatility. We show con- sistency and asymptotic normality of the kernel smoothed realised volatility and the filtered spot volatility. The choice of bandwidth is discussed and data- driven selection methods proposed. A simulation study examines the finite sample properties of the estimators.

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Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2007-02.

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Length: 33
Date of creation: 11 May 2007
Date of revision:
Handle: RePEc:aah:create:2007-02
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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