CEBA News
Seminars

Realized Drift

2022-10-09 17:00
Time: 14 October (Friday) 14.00 Moscow time
Speaker: Roberto RenĂ² (Professor of Quantitative Finance at the Department of Economics of the University of Verona)
Title: Realized Drift

Field of study
"Finance, Econometrics"

What problem is your research intended to solve?
"Can we use the drift part of prices to better forecast volatility?"

What did your research find?
"Drift can be measured in the data in some relevant instances; this helps to forecast volatility substantially."

Abstract: Drift and volatility are two mainsprings of asset price dynamics. While volatilities have been studied extensively in the literature, drifts are commonly believed to be impossible to estimate and largely ignored in the literature. This paper shows how to detect drift using realized autocovariance implemented on high-frequency data. We use a theoretical treatment in which the classical model for the efficient price, an Ito semimartingale possibly contaminated by microstructure noise, is enriched with drift and volatility explosions. Our theory advocates a novel decomposition for realized variance into a drift and a volatility component, which leads to significant improvements in volatility forecasting.

More information, a link to the research and the upcoming seminar here.
Seminar will be streamed on our YouTube channel and recorded.

We are looking forward to seeing you!