A Markov Chain Estimator of Multivariate Volatility from High Frequency Data

Peter Reinhard Hansen (), Guillaume Horel (), Asger Lunde () and Ilya Archakov ()
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Peter Reinhard Hansen: European University Institute and CREATES
Guillaume Horel: Serenitas Capital
Asger Lunde: University of Aarhus and CREATES
Ilya Archakov: European University Institute

A chapter in The Fascination of Probability, Statistics and their Applications, 2016, pp 361-394 from Springer

Abstract: Abstract We introduce a multivariate estimator of financial volatility that is based on the theory of Markov chains. The Markov chain framework takes advantage of the discreteness of high-frequency returns. We study the finite sample properties of the estimation in a simulation study and apply it to high-frequency commodity prices.

Keywords: Markov chain; Multivariate volatility; Quadratic variation; Integrated variance; Realized variance; High frequency data (search for similar items in EconPapers)
JEL-codes: C10 C22 C80 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-25826-3_17

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DOI: 10.1007/978-3-319-25826-3_17

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