Paper: CCSS-09-007

Title: Most Efficient Homogeneous Volatility Estimators

Authors: A. Saichev, D. Sornette*, V. Filimonov

Abstract:

We present a new theory of homogeneous volatility (and variance) estimators for arbitrary stochastic processes. The main tool of our theory is the parsimonious encoding of all the information contained in the OHLC prices for a given time interval by the joint distributions of the high-minusopen, low-minus-open and close-minus-open values, whose analytical expression is derived exactly for Wiener processes with drift. The efficiency of the new proposed estimators is favorably compared with that of the Garman-Klass, Roger-Satchell and maximum likelihood estimators.

Keywords: Variance and volatility estimators, efficiency, homogeneous functions, Schwarz inequality, extremes of Wiener processes

Manuscript status: Submitted

JEL codes: C13, C51
PACS numbers:

Local copy of the paper: CCSS-09-007.pdf

Submission date: 25-10-2009