Most procedures for modeling and forecasting financial asset return volatilities rely on restrictive and complicated parametric GARCH or stochastic volatility models. The method of realized volatility constructed from high-frequency intraday returns is an alternative choice for volatility measurement. In this paper we make an empirical analysis on Chinese stock index data by using the method of...

A measurement volatility of return process should be the primary object of traders and practitioners in financial market for management of their portfolios and making trading decisions. The realized volatility is the representative estimator of (integrated) volatility and is computed from historical data of the return. The sampling interval of the return plays a key role in computing the realiz...

Continuous-time autoregressive moving average (CARMA) processes with a nonnegative kernel and driven by a non-decreasing Lévy process constitute a useful and very general class of stationary, non-negative continuous-time processes which have been used, in particular, for the modelling of stochastic volatility. Brockwell, Davis and Yang (2011) considered the fitting of CARMA models to closely an...

This paper investigates nonlinear features of FX volatility dynamics using estimates of daily volatility based on the sum of intraday squared returns. Measurement errors associated with using realized volatility to estimate ex post latent volatility imply that standard time series models of the conditional variance become variants of an ARMAXmodel. We explore nonlinear departures from these lin...

A central limit theorem for the realized volatility estimator of the integrated volatility based on a specific random sampling scheme is proved. The estimator is shown to be also robust to market microstructure noise induced by price discreteness and bid-ask spreads.

We investigate the use of subsampling for conducting inference about quadratic variation of a discretely observed di¤usion process under an in…ll asymptotic scheme. The subsampling method of Politis and Romano (1994) has been shown to be useful in many situations as a way of conducting inference under weak assumptions and without utilizing knowledge of limiting distributions. We show that this ...

The paper studies the nonparametric connection between realized and implied volatilities. No-arbitrage identities and comparison inequalities are found. We formulate the multi-factor trading system on the volatility scale. To empirically determine the number of factors, we develop a high frequency analysis for sequential F-testing. We also design a cross validated estimate of quadratic variation.