Non-parametric estimation of intraday spot volatility : disentangling Instantaneous Trend and Seasonality

Thibault Vatter, Hau-Tieng Wu, Valérie Chavez-Demoulin and Bin Yu ; academic aditor: Nikolaus Hautsch

We provide a new framework for modeling trends and periodic patterns in high-frequency financial data. Seeking adaptivity to ever-changing market conditions, we enlarge the Fourier flexible form into a richer functional class: both our smooth trend and the seasonality are non-parametrically time-varying and evolve in real time. We provide the associated estimators and use simulations to show that they behave adequately in the presence of jumps and heteroskedastic and heavy-tailed noise. A study of exchange rate returns sampled from 2010 to 2013 suggests that failing to factor in the seasonality's dynamic properties may lead to misestimation of the intraday spot volatility.

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Year of publication:	2015
Authors:	Vatter, Thibault ; Wu, Hau-tieng ; Chavez-Demoulin, Valérie ; Yu, Bin
Other Persons:	Hautsch, Nikolaus (ed.)
Published in:	Econometrics : open access journal. - Basel : MDPI, ISSN 2225-1146, ZDB-ID 2717594-7. - Vol. 3.2015, 4, p. 864-887
Subject:	intraday spot volatility \| seasonality \| foreign exchange returns \| time-frequency analysis \| synchrosqueezing \| Volatilität \| Volatility \| Saisonale Schwankungen \| Seasonal variations \| Zeitreihenanalyse \| Time series analysis \| Wechselkurs \| Exchange rate \| Schätzung \| Estimation \| ARCH-Modell \| ARCH model \| Spotmarkt \| Spot market \| Schätztheorie \| Estimation theory \| Devisenmarkt \| Foreign exchange market