Widely used volatility estimation methods mainly consider one of the following two simple microstructure noise models: random additive noise on log prices, or pure rounding errors. Apparently in real data these two types of noise co-exist. In this paper, we discover a common feature of these two...

This paper introduces a solution that combines the Kalman and particle fi lters to the challenging problem of estimating integrated volatility using high-frequency data where the underlying prices are perturbed by a mixture of random noise and price discreteness. An explanation is presented of...