On the Estimation of Integrated Volatility in the Presence of Jumps and Microstructure Noise

46 Pages Posted: 10 Jun 2016 Last revised: 11 Jan 2019

See all articles by Christian T. Brownlees

Christian T. Brownlees

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE)

Eulalia Nualart

Universitat Pompeu Fabra - Department of Economics and Business; Barcelona Graduate School of Economics (Barcelona GSE)

Yucheng Sun

Capital University of Economics and Business

Date Written: January 9, 2019

Abstract

This paper is concerned with the problem of the estimation of the integrated volatility of log-prices based on high frequency data when both price jumps and market microstructure noise are present. We begin by providing a survey of the leading estimators introduced in the literature to tackle volatility estimation in this setting. We then introduce novel integrated volatility estimators based on a truncation technique and establish their properties. Finally, we carry out a simulation study to compare the performance of the di erent estimation techniques.

Keywords: integrated volatility, two-scales realized volatility estimator, realized kernel estimator, jumps, market microstructure noise

JEL Classification: C01, C02

Suggested Citation

Brownlees, Christian T. and Nualart, Eulalia and Sun, Yucheng, On the Estimation of Integrated Volatility in the Presence of Jumps and Microstructure Noise (January 9, 2019). Available at SSRN: https://ssrn.com/abstract=2791342 or http://dx.doi.org/10.2139/ssrn.2791342

Christian T. Brownlees (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://84.89.132.1/~cbrownlees/

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas 25-27
Barcelona, Catalonia 08014
Spain

Eulalia Nualart

Universitat Pompeu Fabra - Department of Economics and Business ( email )

Barcelona
Spain

HOME PAGE: http://www.nualart.es

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Yucheng Sun

Capital University of Economics and Business ( email )

Beijing
China

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