{"title":"State Space Model of Realized Volatility under the Existence of Dependent Market Microstructure Noise","authors":"Toru Yano","doi":"arxiv-2408.17187","DOIUrl":null,"url":null,"abstract":"Volatility means the degree of variation of a stock price which is important\nin finance. Realized Volatility (RV) is an estimator of the volatility\ncalculated using high-frequency observed prices. RV has lately attracted\nconsiderable attention of econometrics and mathematical finance. However, it is\nknown that high-frequency data includes observation errors called market\nmicrostructure noise (MN). Nagakura and Watanabe[2015] proposed a state space\nmodel that resolves RV into true volatility and influence of MN. In this paper,\nwe assume a dependent MN that autocorrelates and correlates with return as\nreported by Hansen and Lunde[2006] and extends the results of Nagakura and\nWatanabe[2015] and compare models by simulation and actual data.","PeriodicalId":501293,"journal":{"name":"arXiv - ECON - Econometrics","volume":"17 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2024-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"arXiv - ECON - Econometrics","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/arxiv-2408.17187","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
Volatility means the degree of variation of a stock price which is important
in finance. Realized Volatility (RV) is an estimator of the volatility
calculated using high-frequency observed prices. RV has lately attracted
considerable attention of econometrics and mathematical finance. However, it is
known that high-frequency data includes observation errors called market
microstructure noise (MN). Nagakura and Watanabe[2015] proposed a state space
model that resolves RV into true volatility and influence of MN. In this paper,
we assume a dependent MN that autocorrelates and correlates with return as
reported by Hansen and Lunde[2006] and extends the results of Nagakura and
Watanabe[2015] and compare models by simulation and actual data.
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