Non-parametric estimation of intraday spot volatility: Disentangling instantaneous trend and seasonality

Published

Journal Article

© 2015 by the authors; licensee MDPI, Basel, Switzerland. We provide a new framework for modeling trends and periodic patterns in high-frequency financial data. Seeking adaptivity to ever-changing market conditions, we enlarge the Fourier flexible form into a richer functional class: both our smooth trend and the seasonality are non-parametrically time-varying and evolve in real time. We provide the associated estimators and use simulations to show that they behave adequately in the presence of jumps and heteroskedastic and heavy-tailed noise. A study of exchange rate returns sampled from 2010 to 2013 suggests that failing to factor in the seasonality’s dynamic properties may lead to misestimation of the intraday spot volatility.

Full Text

Duke Authors

Cited Authors

  • Vatter, T; Wu, HT; Chavez-Demoulin, V; Yu, B

Published Date

  • December 1, 2015

Published In

Volume / Issue

  • 3 / 4

Start / End Page

  • 864 - 887

Electronic International Standard Serial Number (EISSN)

  • 2225-1146

Digital Object Identifier (DOI)

  • 10.3390/econometrics3040864

Citation Source

  • Scopus