On covariance estimation of non-synchronously observed diffusion processes

Takaki Hayashi, Nakahiro Yoshida

Research output: Contribution to journalArticle

193 Citations (Scopus)

Abstract

We consider the problem of estimating the covariance of two diffusion processes when they are observed only at discrete times in a non-synchronous manner. The modern, popular approach in the literature, the realized covariance estimator, which is based on (regularly spaced) synchronous data, is problematic because the choice of regular interval size and data interpolation scheme may lead to unreliable estimation. We propose a new estimator which is free of any 'synchronization' processing of the original data, hence free of bias or other problems caused by it.

Original languageEnglish
Pages (from-to)359-379
Number of pages21
JournalBernoulli
Volume11
Issue number2
DOIs
Publication statusPublished - 2005 Apr 1
Externally publishedYes

Keywords

  • Diffusions
  • Discrete-time observations
  • High-frequency data
  • Mathematical finance
  • Non-synchronous trading
  • Quadratic variation
  • Realized volatility

ASJC Scopus subject areas

  • Statistics and Probability

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