Non-Parametric Estimation of Intraday Spot Volatility: Disentangling Instantaneous Trend and Seasonality
We provide a new framework for modeling trends and periodic patterns in high-frequency financial data. Seeking adaptivity to ever-changing market conditions, we enlarge the Fourier flexible form into a richer functional class: both our smooth trend and the seasonality are non-parametrically time-var...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2015-12-01
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| Series: | Econometrics |
| Subjects: | |
| Online Access: | http://www.mdpi.com/2225-1146/3/4/864 |
| Summary: | We provide a new framework for modeling trends and periodic patterns in high-frequency financial data. Seeking adaptivity to ever-changing market conditions, we enlarge the Fourier flexible form into a richer functional class: both our smooth trend and the seasonality are non-parametrically time-varying and evolve in real time. We provide the associated estimators and use simulations to show that they behave adequately in the presence of jumps and heteroskedastic and heavy-tailed noise. A study of exchange rate returns sampled from 2010 to 2013 suggests that failing to factor in the seasonality’s dynamic properties may lead to misestimation of the intraday spot volatility. |
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| ISSN: | 2225-1146 |