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Relating Stochastic Volatility Estimation Methods

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  • Charles S. Bos

    (VU University Amsterdam)

Abstract

This discussion paper led to a chapter in: (L. Bauwens, C.M. Hafner & S. Laurent (Eds.)), Relating stochastic volatility estimation methods (pp. 147-174). New York: Wiley. Estimation of the volatility of time series has taken off since the introduction of the GARCH and stochastic volatility models. While variants of the GARCH model are applied in scores of articles, use of the stochastic volatility model is less widespread. In this article it is argued that one reason for this difference is the relative difficulty of estimating the unobserved stochastic volatility, and the varying approaches that have been taken for such estimation. In order to simplify the comprehension of these estimation methods, the main methods for estimating stochastic volatility are discussed, with focus on their commonalities. In this manner, the advantages of each method are investigated, resulting in a comparison of the methods for their efficiency, difficulty-of-implementation, and precision.

Suggested Citation

  • Charles S. Bos, 2011. "Relating Stochastic Volatility Estimation Methods," Tinbergen Institute Discussion Papers 11-049/4, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20110049
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    References listed on IDEAS

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    Cited by:

    1. Trojan, Sebastian, 2013. "Regime Switching Stochastic Volatility with Skew, Fat Tails and Leverage using Returns and Realized Volatility Contemporaneously," Economics Working Paper Series 1341, University of St. Gallen, School of Economics and Political Science, revised Aug 2014.
    2. Sergey Egiev, 2016. "On Persistence of Uncertainty Shocks," HSE Working papers WP BRP 144/EC/2016, National Research University Higher School of Economics.

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    More about this item

    Keywords

    Stochastic volatility; estimation; methodology;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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