NONPARAMETRIC FILTERING OF NONPARAMETRIC FILTERING OF A KERNEL-BASED APPROACH

A kernel weighted version of the standard realized integrated volatility estimator is proposed. By different choices of the kernel and bandwidth, the measure allows us to focus on specific characteristics of the volatility process. In particular, as the bandwidth vanishes, an estimator of the realized spot volatility is obtained. We denote this the filtered spot volatility. We show consistency and asymptotic normality of the kernel smoothed realized volatility and the filtered spot volatility.We consider boundary issues and propose two methods to handle these. The choice of bandwidth is discussed and data-driven selection methods are proposed. A simulation study examines the finite sample properties of the estimators.