Central limit theorem for the realized volatility based on tick time sampling |
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Authors: | Masaaki Fukasawa |
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Institution: | (1) Department of Mathematics, Imperial College London, London, SW7 2AZ, UK;(2) Mathematics Institute, Warwick University, Coventry, CV4 7AL, UK |
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Abstract: | A central limit theorem for the realized volatility estimator of the integrated volatility based on a specific random sampling
scheme is proved, where prices are sampled with every ‘continued price change’ in bid or ask quotation data. The estimator
is shown to be robust to market microstructure noise induced by price discreteness and bid–ask spreads. More general sampling
schemes also are treated in case that the price process is a diffusion. |
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Keywords: | |
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