A Tale of Two Time Scales
两个时间尺度的故事
It is a common practice in finance to estimate volatility from the sum of frequently sampled squared returns. However, market microstructure poses challenges to this estimation approach, as evidenced by recent empirical studies in finance. The present work attempts to lay out theoretical grounds that reconcile continuous-time modeling and discrete-time samples. We propose an estimation approach that takes advantage of the rich sources in tick-by-tick data while preserving…