Estimating the Spot Covariation of Asset Prices—Statistical Theory and Empirical Evidence
Estimating the Spot Covariation of Asset Prices—Statistical Theory and Empirical Evidence
We propose a new estimator for the spot covariance matrix of a multi-dimensional continuous semimartingale log asset price process, which is subject to noise and nonsynchronous observations. The estimator is constructed based on a local average of block-wise parametric spectral covariance estimates. The latter originate from a local method of …