Realized volatility
Torben Andersen and
Luca Benzoni
No WP-08-14, Working Paper Series from Federal Reserve Bank of Chicago
Abstract:
Realized volatility is a nonparametric ex-post estimate of the return variation. The most obvious realized volatility measure is the sum of finely-sampled squared return realizations over a fixed time interval. In a frictionless market the estimate achieves consistency for the underlying quadratic return variation when returns are sampled at increasingly higher frequency. We begin with an account of how and why the procedure works in a simplified setting and then extend the discussion to a more general framework. Along the way we clarify how the realized volatility and quadratic return variation relate to the more commonly applied concept of conditional return variance. We then review a set of related and useful notions of return variation along with practical measurement issues (e.g., discretization error and microstructure noise) before briefly touching on the existing empirical applications.
Keywords: Stochastic; analysis (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-ecm and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)
Downloads: (external link)
http://www.chicagofed.org/digital_assets/publicati ... s/2008/wp2008_14.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:wp-08-14
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Paper Series from Federal Reserve Bank of Chicago Contact information at EDIRC.
Bibliographic data for series maintained by Lauren Wiese ().