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Adaptive Realized Kernels

Author

Listed:
  • Marine Carrasco

    (Université de Montréal, Départment d'Economie - CIREQ - Centre interuniversitaire de recherche en économie quantitative - Université de Montréal)

  • Rachidi Kotchoni

    () (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)

Abstract

We design adaptive realized kernels to estimate the integrated volatility in a framework that combines a stochastic volatility model with leverage effect for the efficient price and a semiparametric microstructure noise model speci ed at the highest frequency. Some time dependence parameters of the noise model must be estimated before adaptive realized kernels can be implemented. We study their performance by simulation and illustrate their use with twelve stocks listed in the Dow Jones Industrial. As expected, we nd that adaptive realized kernels achieves the optimal trade-off between the discretization error and the microstructure noise.

Suggested Citation

  • Marine Carrasco & Rachidi Kotchoni, 2013. "Adaptive Realized Kernels," Working Papers hal-00867967, HAL.
  • Handle: RePEc:hal:wpaper:hal-00867967
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00867967
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    References listed on IDEAS

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    Cited by:

    1. Ikeda, Shin S., 2016. "A bias-corrected estimator of the covariation matrix of multiple security prices when both microstructure effects and sampling durations are persistent and endogenous," Journal of Econometrics, Elsevier, vol. 193(1), pages 203-214.

    More about this item

    Keywords

    Integrated Volatility; Method of Moment; Microstructure Noise; Realized Kernels;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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