Realized Volatility and Multipower Variation
CREATES Research Paper 2009-49
16 Pages Posted: 29 Oct 2009
Date Written: October 27, 2009
Abstract
This paper reviews basic notions of return variation in the context of a continuous-time arbitrage-free asset pricing model and discusses some of their applications. We first define return variation in the infeasible continuous-sampling case. Then we introduce realized measures obtained from high-frequency observations which provide consistent and asymptotically normal estimates of the underlying return variation. The paper discusses applications of these measures for reduced-form volatility modeling and forecasting as well as testing for the presence of jumps.
Keywords: realized volatility, multipower variation, jumps, quadratic variation, volatility estimation, volatility forecasting, jump testing, continuous-time stochastic volatility model
JEL Classification: C22, C51, C52, G12
Suggested Citation: Suggested Citation
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