Spot volatility estimation using delta sequences

Cecilia Mancini (), Vanessa Mattiussi () and Roberto Renò

Finance and Stochastics, 2015, vol. 19, issue 2, 293 pages

Abstract: We introduce a unifying class of nonparametric spot volatility estimators based on delta sequences and conceived to include many of the existing estimators in the field as special cases. The full limit theory is first derived when unevenly sampled observations under infill asymptotics and fixed time horizon are considered, and the state variable is assumed to follow a Brownian semimartingale. We then extend our class of estimators to include Poisson jumps or financial microstructure noise in the observed price process. This work makes different approaches (kernels, wavelets, Fourier) comparable. For example, we explicitly illustrate some drawbacks of the Fourier estimator. Specific delta sequences are applied to data from the S&P 500 stock index futures market. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Spot volatility; High-frequency data; Microstructure noise; Dirac delta; Fourier estimator; 91G70; C13; C14; C22; G1 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (15)

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Working Paper: Spot Volatility Estimation Using Delta Sequences (2012)
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DOI: 10.1007/s00780-015-0255-1

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