Model-based Estimation of High Frequency Jump Diffusions with Microstructure Noise and Stochastic Volatility

Arbeitspapier

When analysing the volatility related to high frequency financial data, mostly non-parametric approaches based on realised or bipower variation are applied. This article instead starts from a continuous time diffusion model and derives a parametric analog at high frequency for it, allowing simultaneously for microstructure effects, jumps, missing observations and stochastic volatility. Estimation of the model delivers measures of daily variation outperforming their non-parametric counterparts. Both with simulated and actual exchange rate data, the feasibility of this novel approach is shown. The parametric setting is used to estimate the intra-day trend in the Euro/U.S. Dollar exchange rate.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 08-011/4

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Semiparametric and Nonparametric Methods: General ; General Equilibrium and Disequilibrium: Financial Markets ; Financial Markets and the Macroeconomy
• Subject: High frequency ; integrated variation ; intra-day ; jump diffusions ; microstructure noise ; stochastic volatility ; exchange rates ; Zeitreihenanalyse ; Derivat ; Stochastischer Prozess ; Volatilität ; Messung ; Bayes-Statistik ; Nichtparametrisches Verfahren ; Theorie ; Wechselkurs ; Euro ; US-Dollar

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bos, Charles S.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/87075
• Last update: 10.03.2025, 11:43 AM CET