 Inference from the futures: ranking the noise cancelling accuracy of realized measuresGiorgio Mirone ()
CREATES Research Papers from Department of Economics and Business Economics, Aarhus University Abstract: We consider the log-linear relationship between futures contracts and their underlying assets and show that in the classical Brownian semi-martingale (BSM) framework the two series must, by no-arbitrage, have the same integrated variance. We then introduce the concept of noise cancelling and propose a generally applicable methodology to assess the performance of realized measures when the variable of interest is latent, overcoming the problem posed by the lack of a true value for the integrated variance. Using E-mini index futures contracts, we carry out formal testing of several realized measures in the presence of noise. Moreover, a thorough simulation analysis is employed to evaluate the estimators' sensitivity to different price and noise processes, and sampling frequencies. Keywords: realized variance; estimation comparison; noise cancelling; futures; ranking (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2017-24 Access Statistics for this paper More papers in CREATES Research Papers from Department of Economics and Business Economics, Aarhus University |
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