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Identifier to cite or link to this item: https://hdl.handle.net/10086/18295

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Title
A State Space Approach to Estimating the Integrated Variance under the Existence of Market Microstructure Noise
Creator
Creator Name
Nagakura, Daisuke Nagakura, Daisuke
長倉, 大輔 長倉, 大輔
ナガクラ, ダイスケ ナガクラ, ダイスケ
Affiliation
Affiliation Name
Bank of Japan
Creator Name
Watanabe, Toshiaki Watanabe, Toshiaki
渡部, 敏明 渡部, 敏明
ワタナベ, トシアキ ワタナベ, トシアキ
Affiliation
Affiliation Name
Hitotsubashi University
Editor
Contributor Name
社会科学の高度統計・実証分析拠点構築 = Research Unit for Statistical and Empirical Analysis in Social Sciences
Key Word
Realized Variance
Integrated Variance
Microstructure Noise
State Space
Identification
Exchange Rate
Abstract
We call the realized variance (RV) calculated with oberved prices contaminated by (market) microstructure noises (MNs) the noise-contaminated RV (NCRV), referring to the bias component in the NCRV associated with the MNs as the MN component. This paper develops a state space method for estimating the integrated variance (IV) and MN component. We represent the NCRV by a state space form and show that the state space form parameters are not identifiable, however, they can be expressed as functions of identifiable parameters. We illustrate how to estimate these parameters. The proposed method also serves as a convenient way for estimating a general class of continuous-time stochastic volatility (SV) models under the existence of MN. We apply the proposed method to yen/dollar exchange rate data, where we find that most of the variation in NCRV is of the MN component.
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2010-02
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
Global COE Hi-Stat Discussion Paper Series No. 115
Number of Pages
58
Sponsorship
グローバルCOEプログラム = Global COE Program
Appears in Collections
Global COE Hi-Stat Discussion Paper Series
URL
https://hdl.handle.net/10086/18295