European Business Schools Librarian's Group
Finance Research Group Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies
No F-2008-06: Volatility and realized quadratic variation of differenced returns : A wavelet method approach
Esben Høg ()
Additional contact information
Esben Høg: Department of Business Studies, Aarhus School of Business, Postal: The Aarhus School of Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Abstract: This paper analyzes some asymptotic results for an alternative estimator of integrated volatility in a continuous-time diffusion process of high frequency data (used in asset pricing finance).
The estimator, which is computationally efficient, is based on the quadratic variation of the second order log-price differences. This is contrary to the well known realized quadratic variation of intra daily returns (which is based on first order log-price differences). This latter is known as realized volatility.
Analytically, the asymptotics of the proposed estimator is compared to the usual realized volatility estimators. Lastly, we provide some simulation experiments to illustrate the results.
Keywords: continuous-time methods; quadratic variation; realized volatility; second order quadratic variation
21 pages, August 1, 2008
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