Instantaneous Volatility Seasonality of High-Frequency Markets in Directional-Change Intrinsic Time
Vladimir Petrov (),
Anton Golub () and
Richard Olsen ()
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Vladimir Petrov: Department of Banking and Finance, University of Zurich, Plattenstrasse 14, 8032 Zurich, Switzerland
Anton Golub: Flov Technologies AG, Gotthardstrasse 26, 6300 Zug, Switzerland
Richard Olsen: Lykke Corp., Alpenstrasse 9, 6300 Zug, Switzerland
Journal of Risk and Financial Management, 2019, vol. 12, issue 2, 1-31
We propose a novel intraday instantaneous volatility measure which utilises sequences of drawdowns and drawups non-equidistantly spaced in physical time as indicators of high-frequency activity of financial markets. The sequences are re-expressed in terms of directional-change intrinsic time which ticks only when the price curve changes the direction of its trend by a given relative value. We employ the proposed measure to uncover weekly volatility seasonality patterns of three Forex and one Bitcoin exchange rates, as well as a stock market index. We demonstrate the long memory of instantaneous volatility computed in directional-change intrinsic time. The provided volatility estimation method can be adapted as a universal multiscale risk-management tool independent of the discreteness and the type of analysed high-frequency data.
Keywords: instantaneous volatility; directional-change; seasonality; forex; bitcoin; S&P500; risk management; drawdown (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:12:y:2019:i:2:p:54-:d:219095
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