Spectral Estimation of Covolatility from Noisy Observations Using Local Weights
Spectral Estimation of Covolatility from Noisy Observations Using Local Weights
ABSTRACT We propose localized spectral estimators for the quadratic covariation and the spot covolatility of diffusion processes, which are observed discretely with additive observation noise. The appropriate estimation for time‐varying volatilities is based on an asymptotic equivalence of the underlying statistical model to a white‐noise model with correlation and volatility …