Nonparametric Range-Based Double Smoothing Spot Volatility Estimation for Diffusion Models
We consider nonparametric spot volatility estimation for diffusion models with discrete high frequency observations. Our estimator is carried out in two steps. First, using the local average of the range-based variance, we propose a crude estimator of the spot volatility. Second, we use usual nonpar...
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| Main Author: | |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2020-01-01
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| Series: | Complexity |
| Online Access: | http://dx.doi.org/10.1155/2020/5048925 |
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| Summary: | We consider nonparametric spot volatility estimation for diffusion models with discrete high frequency observations. Our estimator is carried out in two steps. First, using the local average of the range-based variance, we propose a crude estimator of the spot volatility. Second, we use usual nonparametric kernel smoothing to reconstruct the volatility function from the crude estimator. By inference, we find such a double smoothing operation can effectively reduce the estimation error. |
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| ISSN: | 1076-2787 1099-0526 |