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Events

Virtual Seminar: Prof. Jia Li - Singapore Management University

Thursday, 25 November 2021
15:00 to 17:00
Prof. Jia Li
Virtual event

Topic: Reading the Candlesticks: An OK Estimator for Volatility

This webinar is brought to you by QRFE.

Abstract: The nonparametric inference on “spot” volatility has mostly relied on high-frequency returns data. In this paper, we exploit the richer information in high-frequency candlesticks and propose an Optimal candlesticK (OK) estimator for the spot volatility at a given time point. Under a standard infill asymptotic setting for Ito semimartingale price processes, we show that the OK estimator is asymptotically unbiased and has minimal asymptotic variance within a class of linear estimators. In addition, its estimation error can be coupled by a Brownian functional, whose distribution is pivotal and known in finite-sample. Optimal confidence intervals can be constructed using the highest density interval of the (nonstandard) coupling distribution. Our theoretical and numerical results suggest that the proposed candlestick-based estimator is much more accurate than the conventional spot volatility estimator based on high-frequency returns. An empirical illustration is provided, which documents the intraday spot volatility dynamics of various assets during the Fed Chairman’s recent congressional testimony.

Click here for Jia Li's website.

To attend the seminar, please register by clicking here.