de Vilder, Robin G. and Visser, Marcel P. (2007): Volatility Proxies for Discrete Time Models.
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Discrete time volatility models typically employ a latent scale factor to represent volatility. High frequency data may be used to construct proxies for these scale factors. Examples are the intraday high-low range and the realized volatility. This paper develops a method for ranking and optimizing volatility proxies. It is possible to outperform the quadratic variation as a proxy for the discrete time scale factor. For the S&P 500 index data over the years 1988-2006 this is achieved by a proxy which puts, among other things, more weight on the highs than on the lows over intraday intervals.
|Item Type:||MPRA Paper|
|Institution:||Korteweg-de Vries Instute for Mathematics, University of Amsterdam|
|Original Title:||Volatility Proxies for Discrete Time Models|
|Keywords:||volatility proxy; realized volatility; quadratic variation; scale factor; arch/garch/stochastic volatility; intraday seasonality|
|Subjects:||C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C65 - Miscellaneous Mathematical Tools
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
|Depositing User:||Marcel Visser|
|Date Deposited:||14. Sep 2007|
|Last Modified:||18. Feb 2013 13:35|
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