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Real-time scheme for the volatility estimation in the presence of microstructure noise

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  • Ogawa Shigeyoshi

    (Department of Mathematical Sciences, Ritsumeikan University, Kusatsu, Shiga 525-8577, Japan. Email: ogawa-s@se.ritsumei.ac.jp)

Abstract

We are concerned with the problem of estimating temporal values of the volatility in the situation that the observation of the price process is contaminated by high frequency noise due to micro structural causes of the system. For the case that there is no such noise, we have presented in the preceding article ([S. Ogawa and K. Wakayama, On a real-time scheme for the estimation of volatility, Monte Carlo Methods and Appl. 13 (2007), pp. 99–116.]) a scheme that is simple enough but might work effectively in a real-time manner. The aim of the present note is to introduce a new scheme by making suitable modifications to the old scheme so that the new one still maintains the nice property of being a real-time estimator.

Suggested Citation

  • Ogawa Shigeyoshi, 2008. "Real-time scheme for the volatility estimation in the presence of microstructure noise," Monte Carlo Methods and Applications, De Gruyter, vol. 14(4), pages 331-342, January.
    • Handle: RePEc:bpj:mcmeap:v:14:y:2008:i:4:p:331-342:n:4
    DOI: 10.1515/MCMA.2008.015
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    References listed on IDEAS

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    1. Mancino, M.E. & Sanfelici, S., 2008. "Robustness of Fourier estimator of integrated volatility in the presence of microstructure noise," Computational Statistics & Data Analysis, Elsevier, vol. 52(6), pages 2966-2989, February.
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    Cited by:

    1. Nien-Lin Liu & Hoang-Long Ngo, 2014. "Approximation of eigenvalues of spot cross volatility matrix with a view toward principal component analysis," Papers 1409.2214, arXiv.org.

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