Bias-optimal vol-of-vol estimation: the role of window overlapping

Autor:	Maria Cristina Recchioni, Giacomo Toscano
Rok vydání:	2021
Předmět:	Cox–Ingersoll–Ross model Computer science Realized variance Process (computing) Estimator Window (computing) Variance (accounting) Volatility (finance) General Economics Econometrics and Finance Algorithm Finance Selection (genetic algorithm)
Zdroj:	Decisions in Economics and Finance. 45:137-185
ISSN:	1129-6569 1593-8883
DOI:	10.1007/s10203-021-00349-4
Popis:	The simplest and most natural vol-of-vol estimator, the pre-estimated spot variance-based realized variance, is typically plagued by a large finite-sample bias. In this paper, we analytically show that allowing for the overlap of consecutive local windows to pre-estimate the spot variance may correct for this bias. In particular, we provide a feasible rule for the bias-optimal selection of the length of local windows when the volatility is a CKLS process. The effectiveness of this rule for practical applications is supported by numerical and empirical analyses.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::db418194274d6b3e593f4274822ff65b https://doi.org/10.1007/s10203-021-00349-4 Zobrazit plný text záznamu Full text from SpringerLink