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Stochastic conditonal range, a latent variable model for financial volatility

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  • Galli, Fausto

Abstract

In this paper I introduce a latent variable augmented version of the conditional autoregressive range (CARR) model. The new model, called stochastic conditional- range (SCR) can be estimated by Kalman filter or by efficient importance sampling depending on the hypotheses on the distributional form of the innovations. A predic- tive accuracy comparison with the CARR model shows that the new approach can provide an interesting alternative.

Suggested Citation

  • Galli, Fausto, 2014. "Stochastic conditonal range, a latent variable model for financial volatility," MPRA Paper 54030, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:54030
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    Cited by:

    1. Xinyu Wu & Haibin Xie, 2019. "Volatility forecasting using stochastic conditional range model with leverage effect," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 35(5), pages 1156-1170, September.

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    More about this item

    Keywords

    Financial econometrics; range; volatility; importance sampling;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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