Stochastic conditonal range, a latent variable model for financial volatility

Galli, Fausto (2014): Stochastic conditonal range, a latent variable model for financial volatility.

Abstract

In this paper I introduce a latent variable augmented version of the conditional autoregressive range (CARR) model. The new model, called stochastic conditional- range (SCR) can be estimated by Kalman filter or by efficient importance sampling depending on the hypotheses on the distributional form of the innovations. A predic- tive accuracy comparison with the CARR model shows that the new approach can provide an interesting alternative.

• Item Type: MPRA Paper
• Language: English
• Keywords: Financial econometrics, range, volatility, importance sampling
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics

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