Realized Variance Modeling: Decoupling Forecasting from Estimation*

Har Modeling for Realized Volatility Forecasting

Analysis of High Frequency Financial Data: Models, Methods and Software. Part II: Modeling and Forecasting Realized Variance Measures

A key problem in financial econometrics is the modeling, estimation and forecasting of conditional return volatility and correlation. Having accurate forecasting models for conditional volatility and correlation is important for accurate derivatives pricing, risk management and asset allocation decisions. It is well known that conditional volatility and correlation are highly predictable. An in...

Pricing options on realized variance

Models which hypothesize that returns are pure jump processes with independent increments have been shown to be capable of capturing the observed variation of market prices of vanilla stock options across strike and maturity. In this paper, these models are employed to derive in closed form the prices of derivatives written on future realized quadratic variation. Alternative work on pricing der...

Forecasting realized volatility: a review

Modeling financial volatility is an important part of empirical finance. This paper provides a literature review of the most relevant volatility models, with a particular focus on forecasting models. We firstly discuss the empirical foundations of different kinds of volatility. The paper, then, analyses the non-parametric measure of volatility, named realized variance, and its empirical applica...

Comment on “ An unbiased measure of realized variance ” and “ Realized variance and market microstructure noise ”

If efficient asset prices follow a semi-martingale and are perfectly observed, their quadratic variation can be measured accurately from the sum of a large number of squared returns sampled over very finely spaced intervals, i.e., realized variance (Andersen et al., 2003, and Barndorff-Nielsen and Shephard, 2002). With the emergence of high-frequency data, it seems that we should be able to ide...