This article shows that realized power variation and its extension, realizedbipower variation, which we introduce here, are somewhat robust to rarejumps. We demonstrate that in special cases, realized bipower variation estimates integrated variance in stochastic volatility models, thus providing...

Short memory models contaminated by level shifts have similar long-memory features as fractionally integrated processes. This makes it hard to verify whether the true data generating process is a pure fractionally integrated process when employing standard estimation methods based on the...

Market microstructure noise is a challenge to high-frequency based estimation of the integrated variance, because the noise accumulates with the sampling frequency. In this paper, we analyze the impact of microstructure noise on the realized range-based variance and propose a bias-correction to...

Short memory models contaminated by level shifts have similar long-memory features as fractionally integrated processes. This makes it hard to verify whether the true data generating process is a pure fractionally integrated process when employing standard estimation methods based on the...

We introduce a new framework, Realized GARCH, for the joint modeling of returns and realized measures of volatility. A key feature is a measurement equation that relates the realized measure to the conditional variance of returns. The measurement equation facilitates a simple modeling of the...

We show how pre-averaging can be applied to the problem of measuring the ex-post covariance of financial asset returns under microstructure noise and non-synchronous trading. A pre-averaged realised covariance is proposed, and we present an asymptotic theory for this new estimator, which can be...

For financial assets whose best quotes almost always change by jumping by the market's price tick size (one cent, five cents, etc.), this paper proposes an estimator of Quadratic Variation which controls for microstructure effects. It measures the prevalence of 'alternations', where quotes jump...

We examine moving average (MA) filters for estimating the integrated variance of a financial asset price in a framework where high frequency price data are contaminated with marketmicrostructure noise. We show that the sum of squared MA residuals needs to be scaled for it to be a suitable...

This rejoinder clarifies issues related to the features of market microstructure noise. Specifically, we show that pre-processing of high-frequency data is very useful for the estimation of quadratic variation. We also document a strong relationship between quadratic variation and the number of...

We consider the problem of deriving an empirical measure of daily integrated variance (IV) in the situation where high-frequency price data are unavailable for part of the day. We study three estimators in this context and characterize the assumptions that justify their use. We show that the...