Modeling intraday volatility of European bond markets: A data filtering application

Hanyu Zhang and Alfonso Dufour

International Review of Financial Analysis, 2019, vol. 63, issue C, 131-146

Abstract: This paper studies the intraday volatility of European government bonds under the framework of the multiplicative component GARCH model (Engle and Sokalska, 2012). Intraday return volatility is specified as the product of daily volatility, intraday seasonality, and a unit GARCH process. The model is applied to 10-year European government bonds during the sovereign debt crisis. We observe large transitory intraday volatility often due to illiquidity effects and outliers. We suggest a flexible and effective procedure for jointly filtering mid-quote prices and estimating volatility models. Finally, we show that intraday data contain relevant information for daily volatility forecasts.

Keywords: Intraday GARCH; European Bond Markets; Data Filters (search for similar items in EconPapers)
JEL-codes: C22 G10 G15 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:63:y:2019:i:c:p:131-146

DOI: 10.1016/j.irfa.2019.02.002

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