A two-stage realized volatility approach to the estimation for diffusion processes from discrete observations

• Main Authors: PHILLIPS, Peter C. B., YU, Jun
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2005
• Subjects: Maximum likelihood; Girsnov theorem; Discrete sampling; Continuous record; Realized volatility; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/soe_research/2048; https://ink.library.smu.edu.sg/context/soe_research/article/3047/viewcontent/SSRN_id757986.pdf
• Institution: Singapore Management University

This paper motivates and introduces a two-stage method for estimating diffusion processes based on discretely sampled observations. In the first stage we make use of the feasible central limit theory for realized volatility, as recently developed in Barndorff-Nielsen and Shephard (2002), to provide...