Instantaneous Volatility Seasonality of High-Frequency Markets in Directional-Change Intrinsic Time
We propose a novel intraday instantaneous volatility measure which utilises sequences of drawdowns and drawups non-equidistantly spaced in physical time as indicators of high-frequency activity of financial markets. The sequences are re-expressed in terms of directional-change intrinsic time which t...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2019-04-01
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| Series: | Journal of Risk and Financial Management |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1911-8074/12/2/54 |
| Summary: | We propose a novel intraday instantaneous volatility measure which utilises sequences of drawdowns and drawups non-equidistantly spaced in physical time as indicators of high-frequency activity of financial markets. The sequences are re-expressed in terms of directional-change intrinsic time which ticks only when the price curve changes the direction of its trend by a given relative value. We employ the proposed measure to uncover weekly volatility seasonality patterns of three Forex and one Bitcoin exchange rates, as well as a stock market index. We demonstrate the long memory of instantaneous volatility computed in directional-change intrinsic time. The provided volatility estimation method can be adapted as a universal multiscale risk-management tool independent of the discreteness and the type of analysed high-frequency data. |
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| ISSN: | 1911-8074 |