Estimating Volatility in the Presence of Market Microstructure Noise: A Review of the Theory and Practical Considerations

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Abstract

This chapter reviews our recent work on disentangling high frequency volatility estimators from market microstructure noise, based on maximum-likelihood in the parametric case and two (or more) scales realized volatility (TSRV) in the nonparametric case. We discuss the basic theory, its extensions and the practical implementation of the estimators.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  1. 1.Princeton University and NBER, Bendheim Center for FinancePrinceton UniversityPrincetonU.S.A.
  2. 2.Department of StatisticsThe University of ChicagoChicagoU.S.A.

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