Spot Volatility Measurement Using a Change-Point Duration Model in the High-Frequency Market

Zhicheng Li, Haipeng Xing and Yan Wang ()
Additional contact information
Zhicheng Li: School of Economics and Trade, Hunan University, Changsha 410079, China
Haipeng Xing: Department of Applied Math, Stony Brook University, Stony Brook, NY 11794, USA
Yan Wang: Business School, Beijing Normal University, Beijing 100875, China

IJFS, 2025, vol. 13, issue 4, 1-20

Abstract: Modeling high-frequency volatility is an important topic of market microstructure, as it provides the empirical tools to measure and analyze the rapid price movements. Yet, volatility at a high frequency often exhibits abrupt shifts driven by news and trading activity, making accurate estimation challenging. This study develops a change-point duration (CPD) model to estimate spot volatility, in which price-change intensities remain constant between events but may shift at random change points. Using simulations and empirical analysis of Nasdaq limit order book data, we demonstrate that the CPD model achieves a favorable balance between responsiveness to sudden shocks and stability in volatility dynamics. Moreover, it outperforms benchmark approaches, including the classical autoregressive conditional duration model, nonparametric duration-based estimators, and candlestick-based measures. These findings highlight the CPD framework as an effective tool for volatility estimation in high-frequency trading environments.

Keywords: spot volatility; market microstructure; change-point model; price duration (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7072/13/4/186/pdf (application/pdf)
https://www.mdpi.com/2227-7072/13/4/186/ (text/html)

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:gam:jijfss:v:13:y:2025:i:4:p:186-:d:1764124

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().