Time-Bridge Estimators of Integrated Variance

A. Saichev and D. Sornette

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Abstract: We present a set of log-price integrated variance estimators, equal to the sum of open-high-low-close bridge estimators of spot variances within $n$ subsequent time-step intervals. The main characteristics of some of the introduced estimators is to take into account the information on the occurrence times of the high and low values. The use of the high's and low's of the bridge associated with the original process makes the estimators significantly more efficient that the standard realized variance estimators and its generalizations. Adding the information on the occurrence times of the high and low values improves further the efficiency of the estimators, much above those of the well-known realized variance estimator and those derived from the sum of Garman and Klass spot variance estimators. The exact analytical results are derived for the case where the underlying log-price process is an It\^o stochastic process. Our results suggests more efficient ways to record financial prices at intermediate frequencies.

Date: 2011-08
New Economics Papers: this item is included in nep-ecm and nep-ets
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Published in The Journal of Investment Strategies 2 (2), 71-108 (2013)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1108.2611

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