Nonparametric Range-Based Double Smoothing Spot Volatility Estimation for Diffusion Models

Jingwei Cai

Complexity, 2020, vol. 2020, 1-7

Abstract:

We consider nonparametric spot volatility estimation for diffusion models with discrete high frequency observations. Our estimator is carried out in two steps. First, using the local average of the range-based variance, we propose a crude estimator of the spot volatility. Second, we use usual nonparametric kernel smoothing to reconstruct the volatility function from the crude estimator. By inference, we find such a double smoothing operation can effectively reduce the estimation error.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:hin:complx:5048925

DOI: 10.1155/2020/5048925

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