The SIML estimation of realized volatility of the Nikkei-225 Futures and hedging coefficient with micro-market noise

Naoto Kunitomo and Seisho Sato

Mathematics and Computers in Simulation (MATCOM), 2011, vol. 81, issue 7, 1272-1289

Abstract: For the estimation problem of the realized volatility and hedging coefficient by using high-frequency data with possibly micro-market noise, we use the Separating Information Maximum Likelihood (SIML) method, which was recently developed by Kunitomo and Sato [11–13]. By analyzing the Nikkei-225 Futures data, we found that the estimates of realized volatility and the hedging coefficients have significant bias by using the traditional historical method which should be corrected. The SIML method can handle the bias problem in the estimation by removing the possible micro-market noise in multivariate high-frequency data. We show that the SIML method has the asymptotic robustness under non-Gaussian cases even when the market noises are autocorrelated and endogenous with the efficient market price or the signal term.

Keywords: Realized volatility; Micro-market noise; High-frequency data; Separating Information Maximum Likelihood estimation; Nikkei-225 Futures (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:81:y:2011:i:7:p:1272-1289

DOI: 10.1016/j.matcom.2010.08.003

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