High-Frequency Volatility Estimation and Forecasting References

Summary

The document points readers to research on estimating and forecasting volatility from very short-interval, tick-by-tick data. It highlights estimators designed to reduce distortion from market microstructure, along with work on realized variance, noise effects, and sub-sampling across time scales. These themes address a central challenge in high-frequency measurement: observed transaction and quote changes contain market mechanics as well as information about underlying price variation.

For forecasting, the response suggests that improved volatility estimates can feed into standard forecasting methods and names a study using tick-by-tick data. The answer is a compact bibliography rather than a tutorial: it supplies no estimator formulas, comparative performance results, or implementation guidance. The cited work spans foreign-exchange data and broader market-microstructure research, so applicability depends on the asset, sampling design, and noise characteristics under study. The collection is offered as a starting point for further literature review.

Key ideas

• Tick-by-tick volatility estimators can be designed to reduce market microstructure distortion.
• Realized variance research examines how microstructure noise affects volatility measurement.
• Sub-sampling methods address the choice of time scale in high-frequency estimation.
• Better volatility estimates may serve as inputs to forecasting techniques.
• The document provides references, not a tested comparison or practical implementation recipe.

Tags

# What good papers of short term (<30 seconds) volatility estimation


# What good papers of short term (<30 seconds) volatility estimation












I am looking for good papers of short term (<30 sec) volatility estimation AND short term volatility forecasting. Do you have something in mind ?

## Answer by jaamor (score 7)

https://quant.stackexchange.com/a/15901

Very interesting question. I am not an expert on the subject, however, I was able to find a collection of papers on the subject that should get you started.

Here is a good and very informative paper that walks you through several tick by tick volatility estimators that seek to reduce the volatility imposed by market micro-structure:

Efficient estimation of volatility using high frequency data G Zumbach, F Corsi, A Trapletti

Here is one of the first papers on the subject:

High-frequency data and volatility in foreign-exchange rates B Zhou - Journal of Business & Economic Statistics, 1996

Analysis of market micro-structure noise here:

Realized variance and market microstructure noise PR Hansen, A Lunde - Journal of Business & Economic Statistics, 2006

Another article proposing sub-sampling techniques: A tale of two time scales L Zhang, PA Mykland, 2005

Generally, there is a wealth of papers on the subject of short term volatility estimation. You can take a look at this list of papers citing Zhou's original paper to find relevant research.

Short term volatility forecasting is another very interesting subject. If you get good volatility estimates, you should be able to use standard techniques for forecasting.

Here is one paper:

Forecasting volatility using tick by tick data, RF Engle, Z Sun - 2005

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.