Proxies for daily volatility

Robin de Vilder and Marcel Visser
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Robin de Vilder: PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, KdVI - Korteweg-de Vries Institute for Mathematics - UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam

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Abstract: High frequency data are often used to construct proxies for the daily volatility in discrete time volatility models. This paper introduces a calculus for such proxies, making it possible to compare and optimize them. The two distinguishing features of the approach are (1) a simple continuous time extension of discrete time volatility models and (2) an abstract definition of volatility proxy. The theory is applied to eighteen years worth of S&P 500 index data. It is used to construct a proxy that outperforms realized volatility.

Keywords: volatility proxy; realized volatility; continuous time embedding; intraday periodicity (search for similar items in EconPapers)
Date: 2007-03
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00588307v1
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Working Paper: Proxies for daily volatility (2007)
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