Asymptotic equivalence for inference on the volatility from noisy observations

DOI10.1214/10-AOS855zbMATH Open1215.62113arXiv1105.2128MaRDI QIDQ548535FDOQ548535

Authors: Markus Reiß 

Publication date: 29 June 2011

Published in: The Annals of Statistics (Search for Journal in Brave)

Abstract: We consider discrete-time observations of a continuous martingale under measurement error. This serves as a fundamental model for high-frequency data in finance, where an efficient price process is observed under microstructure noise. It is shown that this nonparametric model is in Le Cam's sense asymptotically equivalent to a Gaussian shift experiment in terms of the square root of the volatility function $sigma$ and a nonstandard noise level. As an application, new rate-optimal estimators of the volatility function and simple efficient estimators of the integrated volatility are constructed.

Full work available at URL: https://arxiv.org/abs/1105.2128

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zbMATH Keywords

microstructure noisehigh-frequency dataintegrated volatilitydiffusions with measurement errorequivalence of experimentsGaussian shiftLe Cam deficiencyspot volatility estimation

Mathematics Subject Classification ID

Asymptotic properties of nonparametric inference (62G20) Applications of statistics to actuarial sciences and financial mathematics (62P05) Statistical methods; risk measures (91G70) Theory of statistical experiments (62B15) Martingales with continuous parameter (60G44)

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Cited In (49)

• Volatility estimation of hidden Markov processes and adaptive filtration
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