Bias-Reduced Estimation of Long Memory Stochastic Volatility

Download or read book Bias-Reduced Estimation of Long Memory Stochastic Volatility written by Per Skaarup Frederiksen and published by . This book was released on 2008 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose to use a variant of the local polynomial Whittle estimator to estimate the memory parameter in volatility for long memory stochastic volatility models with potential nonstationarity in the volatility process. We show that the estimator is asymptotically normal and capable of obtaining bias reduction as well as a rate of convergence arbitrarily close to the parametric rate, n1=2. A Monte Carlo study is conducted to support the theoretical results, and an analysis of daily exchange rates demonstrates the empirical usefulness of the estimators.