Realized volatility forecasting and option pricing

Journal of Econometrics

Volumn 147, Issue 1, 2008, Pages 34-46

  Bandi, Federico M ^a   Russell, Jeffrey R ^a   Yang, Chen ^a  

^a UNIVERSITY OF CHICAGO   (United States)

Author keywords

Economic metrics; Microstructure noise; Option pricing; Realized kernels; Realized variance; Two scale estimator; Volatility forecasting

Indexed keywords

COMMERCE; COSTS; FORECASTING; MICROSTRUCTURE; QUALITY CONTROL;

ECONOMIC METRICS; OPTION PRICING; REALIZED KERNELS; REALIZED VARIANCE; TWO-SCALE ESTIMATOR; VOLATILITY FORECASTING;

FREQUENCY ESTIMATION;

EID: 55349121466     PISSN: 03044076     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jeconom.2008.09.002     Document Type: Article

References (40)

1. Aït-Sahalia Y., and Mancini L. Out-of-sample forecasts of quadratic variation. Journal of Econometrics 147 1 (2008) 17-33
2. Andersen, T.G., Bollerslev, T., Meddahi, N., 2006. Realized volatility forecasting and market microstructure noise. Working Paper
3. Andersen T.G., Bollerslev T., Diebold F.X., and Ebens H. The distribution of realized stock return volatility. Journal of Financial Economics 61 (2001) 43-76
4. Andersen, T.G., Bollerslev, T., Diebold, F.X., Labys, P., 1999. (Understanding, optimizing, using, and forecasting) Realized volatility and correlation. Working Paper
5. Andersen T.G., Bollerslev T., Diebold F.X., and Labys P. Great realizations. Risk Magazine 13 (2000) 105-108
6. Andersen T.G., Bollerslev T., Diebold F.X., and Labys P. Modeling and forecasting realized volatility. Econometrica 71 (2003) 579-625
7. Bandi, F.M., Russell, J.R., 2003. Microstructure noise, realized volatility, and optimal sampling. Working Paper
8. Bandi, F.M., Russell, J.R., 2005. Market microstructure noise, integrated variance estimators, and the accuracy of asymptotic approximations. Working Paper
9. Bandi F.M., and Russell J.R. Separating microstructure noise from volatility. Journal of Financial Economics 79 (2006) 655-692
10. Bandi F.M., and Russell J.R. Volatility. In: Birge J., and Linetski V. (Eds). Handbook of Financial Engineering (2008), Elsevier, North Holland
11. Bandi F.M., and Russell J.R. Microstructure noise, realized variance, and optimal sampling. Review of Economic Studies 75 (2008) 339-369
12. Bandi, F.M., Russell, J.R., Yang, C., 2007. Realized volatility forecasting and option pricing. Technical Report. http://faculty.chicagogsb.edu/federico.bandi/research/BRY_forecasting_optionpricing.pdf
13. Bandi F.M., Russell J.R., and Zhu Y. Using high-frequency data in dynamic portfolio choice. Econometric Reviews 27 (2008) 163-198
14. Barndorff-Nielsen O.E., and Shephard N. Econometric analysis of realized volatility and its use in estimating stochastic volatility models. Journal of the Royal Statistical Society, Series B 64 (2002) 253-280
15. Barndorff-Nielsen O.E., and Shephard N. Variation, jumps, market frictions and high-frequency data in financial econometrics. In: Blundell R., Torsten P., and Newey W.K. (Eds). Advances in Economics and Econometrics. Theory and Applications. Ninth World Congress. Econometric Society Monographs (2007), Cambridge University Press 328-372
16. Barndorff-Nielsen, O.E., Hansen, P., Lunde, A., Shephard, N., 2005. Regular and modified kernel-based estimators of integrated variance: The case with independent noise. Working Paper
17. Barndorff-Nielsen, O.E., Hansen, P., Lunde, A., Shephard, N., 2006. Designing realized kernels to measure ex-post variation of equity prices in the presence of noise. Econometrica (in press)
18. Barndorff-Nielsen, O.E., Hansen, P., Lunde, A., Shephard, N., 2007. Subsampling realized kernels. Working Paper
19. Corradi, V., Distaso, W., Swanson, N., 2006. Predictive inference for integrated volatility. Working Paper
20. Corsi,, 2003. A simple long-memory model of realized volatility. Working Paper
21. De Pooter M., Martens M., and Van Dijk D. Predicting the daily covariance matrix for S&P100 stocks using intraday data: But which frequency to use?. Econometric Reviews 27 (2008) 199-229
22. Elton E.J., Gruber M., Comer G., and Li K. Spiders: Where are the bugs?. Journal of Business 75 (2002) 453-472
23. Engle, R.F., Hong, C.H., Kane, A., 1990. Valuation of variance forecasts with simulated option markets. NBER Working Paper No: 3350
24. Fleming J., Kirby C., and Ostdiek B. The economic value of volatility timing. Journal of Finance 56 (2001) 329-352
25. Fleming J., Kirby C., and Ostdiek B. The economic value of volatility timing using "realized volatility". Journal of Financial Economics 67 (2003) 473-509
26. Geweke J., and Porter-Hudak S. The estimation and application of long memory time series models. Journal of Time Series Analysis 4 (1983) 221-238
27. Ghysels E., and Sinko A. Comment on Hansen and Lunde. Journal of Business and Economic Statistics 24 (2006) 192-194
28. Ghysels, E., Sinko, A., 2006b. Volatility forecasting and microstructure noise. Working Paper
29. Ghysels E., Santa-Clara P., and Valkanov R. Predicting volatility: Getting the most out of return data sampled at different frequencies. Journal of Econometrics 131 (2006) 59-95
30. Hansen P.R., and Lunde A. A realized variance for the whole day based on intermittent high-frequency data. Journal of Financial Econometrics 4 (2005) 525-554
31. Hansen P.R., and Lunde A. Realized variance and market microstructure noise. Journal of Business and Economic Statistics 24 (2006) 127-161 (with discussions)
32. Kalnina I., and Linton O. Estimating quadratic variation consistently in the presence of correlated measurement error. Journal of Econometrics 147 1 (2008) 47-59
33. Large,, 2006. Estimating quadratic variation when quoted prices change by constant increments. Working Paper
34. McAleer M., and Medeiros M. Realized volatility: A review. Econometric Reviews 27 (2008) 10-45
35. Oomen R.C.A. Properties of bias-corrected realized variance under alternative sampling schemes. Journal of Financial Econometrics 3 (2005) 555-577
36. Protter P. Stochastic Integration and Differential Equations. A New Approach (1995), Springer
37. West K.D., Edison H.J., and Cho D. A utility-based comparison of some models of exchange rate volatility. Journal of International Economics 35 (1993) 23-45
38. Zhang L., Mykland P., and Aït-Sahalia Y. A tale of two time scales: Determining integrated volatility with noisy high-frequency data. Journal of the American Statistical Association 100 (2005) 1394-1411
39. Zhang L. Efficient estimation of stochastic volatility using noisy observations: A multi-scale approach. Bernoulli 12 (2006) 1019-1043
40. Zhou B. High-frequency data and volatility in foreign-exchange rates. Journal of Business and Economic Statistics 14 (1996) 45-52