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Nonparametric Volatility Density Estimation

Bert van Es·Peter Spreij·Harry van Zanten
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Abstract

We consider two kinds of stochastic volatility models. Both kinds of models contain a stationary volatility process, the density of which, at a fixed instant in time, we aim to estimate. We discuss discrete time models where for instance a log price process is modeled as the product of a volatility process and i.i.d. noise. We also consider samples of certain continuous time diffusion processes. The sampled time instants will be be equidistant with vanishing distance. A Fourier type deconvolution kernel density estimator based on the logarithm of the squared processes is proposed to estimate the volatility density. Expansions of the bias and bounds on the variances are derived.

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Bert van Es, Peter Spreij, Harry van Zanten. 2002-06-16. Nonparametric Volatility Density Estimation. https://doi.org/10.3150/bj%2F1065444813

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