Spot volatility estimation using the Laplace transform

Imma Valentina Curato, Maria Elvira Mancino and Maria Recchioni

Econometrics and Statistics, 2018, vol. 6, issue C, 22-43

Abstract: A new non-parametric estimator of the instantaneous volatility is defined relying on the link between the Laplace transform of the price process and that of the volatility process for Brownian semimartingale models. The proposed estimation method is a global one, in the spirit of methods based on Fourier series decomposition, with a plus for improving the precision of the volatility estimates near the boundary of the time interval. Consistency and asymptotic normality of the proposed estimator are proved. A simulation study confirms the theoretical results and Monte Carlo evidence of the favorable performance of the proposed estimator in the presence of microstructure noise effects is presented.

Keywords: Laplace transform; Convolution; Spot volatility; Non-parametric estimation; High frequency data; Microstructure noise (search for similar items in EconPapers)
JEL-codes: C14 C58 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosta:v:6:y:2018:i:c:p:22-43

DOI: 10.1016/j.ecosta.2016.07.002

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