Non-Parametric Estimation of Intraday Spot Volatility: Disentangling Instantaneous Trend and Seasonality

34 Pages Posted: 23 Nov 2013 Last revised: 4 Aug 2016

See all articles by Thibault Vatter

Thibault Vatter

Columbia University - Departments of Statistics and Mathematics; University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Hau-tieng Wu

University of Toronto - Department of Mathematics

Valérie Chavez-Demoulin

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne)

Bin Yu

Univ of California at Berkeley

Date Written: August 19, 2015

Abstract

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.

Keywords: Intraday spot volatility, Seasonality, Foreign exchange returns, Time-frequency analysis, Synchrosqueezing

JEL Classification: C14, C22, C51, C52, C58, G17

Suggested Citation

Vatter, Thibault and Wu, Hau-tieng and Chavez-Demoulin, Valérie and Yu, Bin, Non-Parametric Estimation of Intraday Spot Volatility: Disentangling Instantaneous Trend and Seasonality (August 19, 2015). Available at SSRN: https://ssrn.com/abstract=2330159 or http://dx.doi.org/10.2139/ssrn.2330159

Thibault Vatter (Contact Author)

Columbia University - Departments of Statistics and Mathematics ( email )

1255 Amsterdam Avenue
New York, NY 10027
United States

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Lausanne, 1015
Switzerland

Hau-tieng Wu

University of Toronto - Department of Mathematics ( email )

1024, 215 Huron Street
Toronto
Canada

HOME PAGE: http://https://sites.google.com/site/hautiengwu/

Valérie Chavez-Demoulin

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Anthropole
Lausanne, 1015
Switzerland

HOME PAGE: http://https://www.hec.unil.ch/people/vchavez&vue=contact&set_language=en&cl=en

Bin Yu

Univ of California at Berkeley ( email )

United States
5106422021 (Phone)

HOME PAGE: http://statistics.berkeley.edu/~binyu

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