Realized Volatility, Covariance and Hedging Coefficient of the Nikkei-225 Futures with Micro-Market Noise

Naoto Kunitomo and Seisho Sato
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Naoto Kunitomo: Faculty of Economics, University of Tokyo
Seisho Sato: Institute of Statistical Mathematics

No CIRJE-F-601, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: For the estimation problem of the realized volatility, covariance and hedging coefficient by using high frequency data with possibly micro-market noises, we use the Separating Information Maximum Likelihood (SIML) method, which was recently developed by Kunitomo and Sato (2008). By analyzing the Nikkei 225 futures and spot index markets, we have found that the estimates of realized volatility, covariance and hedging coefficient have significant bias by the traditional method which should be corrected. Our method can handle the estimation bias and the tick-size effects of Nikkei 225 futures by removing the possible micro-market noise in multivariate high frequency data.

Pages: 26pages
Date: 2008-11
New Economics Papers: this item is included in nep-ecm, nep-fmk, nep-mst and nep-ore
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2008cf601

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