Volatility Estimation on the Basis of Price Intensities

Posted: 19 Nov 2001

See all articles by Nikolaus Hautsch

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research; Center for Financial Studies (CFS); Vienna Graduate School of Finance (VGSF)

Frank Gerhard

Barclays Investment Bank

Multiple version iconThere are 2 versions of this paper

Abstract

This paper investigates the use of price intensities, i.e.~the time between price changes of a given size, to estimate volatilities based on high-frequency data. We interpret the conditional probability for the occurrence of a price event within a certain time horizon as a risk measure which allows us to obtain an estimator of the conditional volatility per time. To consider censoring effects caused by nontrading periods, we use a proportional hazard model. Seasonalities are taken into account by including regressors based on a flexible Fourier form capturing intraday and time-to-maturity seasonalities. Testing for serial correlation and controlling for unobservable heterogeneity permits us to check for misspecification on different aggregation levels. Empirical results are based on intraday transaction data of Bund future trading at the LIFFE, London.

Keywords: High-frequency data, price durations, proportional hazard model, intraday and time-to-maturity seasonalities

JEL Classification: C25, C41, G14, G15

Suggested Citation

Hautsch, Nikolaus and Gerhard, Frank, Volatility Estimation on the Basis of Price Intensities. Journal of Empirical Finance, Vol. 9, pp. 57-89, 2002. Available at SSRN: https://ssrn.com/abstract=291141

Nikolaus Hautsch (Contact Author)

University of Vienna - Department of Statistics and Operations Research ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Frank Gerhard

Barclays Investment Bank ( email )

5 The North Colonnade
London, Canary Wharf E14 4BB
United Kingdom

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