Renewal Based Volatility Estimation
41 Pages Posted: 22 Feb 2018 Last revised: 25 Sep 2019
Date Written: April 4, 2019
This paper develops the idea of renewal time sampling, a novel sampling scheme constructed from stopping times of semimartingales. Based on this new sampling scheme we propose a class of volatility estimators named renewal based volatility estimators. In this paper we show that: (1) The spot variance of a continuous martingale can be expressed in terms of the conditional intensity or conditional duration density of renewal sampling times; (2) In an infill asymptotics setting, renewal based volatility estimators are consistent and jump-robust estimators of the integrated variance of a general semimartingale; (3) Renewal time sampling and range-based sampling have a higher sampling efficiency than equidistant return-based sampling.
Keywords: High-Frequency Volatility Estimation, Realized Volatility, Renewal Theory
JEL Classification: C02, C13, C14, C51
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