C58 - Financial Econometrics

• A Distributional Approach to Realized Volatility

  Staff Working Paper 2013-49 Selma Chaker, Nour Meddahi

  This paper proposes new measures of the integrated variance, measures which use high-frequency bid-ask spreads and quoted depths. The traditional approach assumes that the mid-quote is a good measure of frictionless price.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C1, C14, C5, C51, C58

• Volatility Forecasting when the Noise Variance Is Time-Varying

  Staff Working Paper 2013-48 Selma Chaker, Nour Meddahi

  This paper explores the volatility forecasting implications of a model in which the friction in high-frequency prices is related to the true underlying volatility. The contribution of this paper is to propose a framework under which the realized variance may improve volatility forecasting if the noise variance is related to the true return volatility.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C1, C14, C5, C51, C58

• Volatility and Liquidity Costs

  Staff Working Paper 2013-29 Selma Chaker

  Observed high-frequency prices are contaminated with liquidity costs or market microstructure noise. Using such data, we derive a new asset return variance estimator inspired by the market microstructure literature to explicitly model the noise and remove it from observed returns before estimating their variance.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets, Market structure and pricing JEL Code(s): C, C1, C14, C5, C51, C58, G, G2, G20