Realized wavelet-based estimation of integrated variance and jumps in the presence of noise

Arbeitspapier

We introduce wavelet-based methodology for estimation of realized variance allowing its measurement in the time-frequency domain. Using smooth wavelets and Maximum Overlap Discrete Wavelet Transform, we allow for the decomposition of the realized variance into several investment horizons and jumps. Basing our estimator in the two-scale realized variance framework, we are able to utilize all available data and get feasible estimator in the presence of microstructure noise as well. The estimator is tested in a large numerical study of the finite sample performance and is compared to other popular realized variation estimators. We use different simulation settings with changing noise as well as jump level in different price processes including long memory fractional stochastic volatility model. The results reveal that our wavelet-based estimator is able to estimate and forecast the realized measures with the greatest precision. Our timefrequency estimators not only produce feasible estimates, but also decompose the realized variation into arbitrarily chosen investment horizons. We apply it to study the volatility of forex futures during the recent crisis at several investment horizons and obtain the results which provide us with better understanding of the volatility dynamics.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: FinMaP-Working Paper ; No. 16

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: quadratic variation ; realized variance ; jumps ; market microstructure noise ; wavelets

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Baruník, Jozef ; Vácha, Lukáš
• Ereignis: Veröffentlichung
• (wer): Kiel University, FinMaP - Financial Distortions and Macroeconomic Performance
• (wo): Kiel
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/102280
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ