Realized Volatility and Multipower Variation

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Abstract

This article reviews basic notions of return variation in the context of a continuous-time arbitrage-free asset pricing model and discusses some of their applications. We first define return variation in the infeasible continuous-sampling case. Then we introduce realized measures obtained from high-frequency observations which provide consistent and asymptotically normal estimates of the underlying return variation. The article discusses applications of these measures for reduced-form volatility modeling and forecasting as well as testing for the presence of jumps.
Original languageEnglish (US)
Title of host publicationEncyclopedia of Quantitative Finance
EditorsRama Cont, Ole Barndorff-Nielsen, Eric Renault
PublisherJohn Wiley & Sons, Ltd.
ISBN (Electronic)9780470061602
DOIs
StatePublished - 2010

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