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Econometrics 2015, 3(4), 864-887; doi:10.3390/econometrics3040864

Non-Parametric Estimation of Intraday Spot Volatility: Disentangling Instantaneous Trend and Seasonality

1
Faculty of Business and Economics (HEC), University of Lausanne, 1015 Lausanne, Switzerland
2
Department of Mathematics, University of Toronto, Toronto M5S2E4, ON, Canada
3
Department of Statistics, University of California, Berkeley 94720, CA, USA
*
Author to whom correspondence should be addressed.
Academic Editor: Nikolaus Hautsch
Received: 19 August 2015 / Revised: 14 November 2015 / Accepted: 26 November 2015 / Published: 18 December 2015
(This article belongs to the Special Issue Financial High-Frequency Data)
View Full-Text   |   Download PDF [7380 KB, uploaded 18 December 2015]   |  

Abstract

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. View Full-Text
Keywords: intraday spot volatility; seasonality; foreign exchange returns; time-frequency analysis; synchrosqueezing intraday spot volatility; seasonality; foreign exchange returns; time-frequency analysis; synchrosqueezing
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Vatter, T.; Wu, H.-T.; Chavez-Demoulin, V.; Yu, B. Non-Parametric Estimation of Intraday Spot Volatility: Disentangling Instantaneous Trend and Seasonality. Econometrics 2015, 3, 864-887.

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