Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87075
Authors: 
Bos, Charles S.
Year of Publication: 
2008
Series/Report no.: 
Tinbergen Institute Discussion Paper 08-011/4
Abstract: 
When analysing the volatility related to high frequency financial data, mostly non-parametric approaches based on realised or bipower variation are applied. This article instead starts from a continuous time diffusion model and derives a parametric analog at high frequency for it, allowing simultaneously for microstructure effects, jumps, missing observations and stochastic volatility. Estimation of the model delivers measures of daily variation outperforming their non-parametric counterparts. Both with simulated and actual exchange rate data, the feasibility of this novel approach is shown. The parametric setting is used to estimate the intra-day trend in the Euro/U.S. Dollar exchange rate.
Subjects: 
High frequency
integrated variation
intra-day
jump diffusions
microstructure noise
stochastic volatility
exchange rates
JEL: 
C11
C14
D53
E44
Document Type: 
Working Paper

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