5 Nonparametric volatility and co-volatility

• Alternative to GARCH modelling is nonparametric approach which uses high frequency returns to estimate the volatility at lower frequency

Two nonparametric types of daily volatility measures are common in empirical finance:

1. OHLC measures (use only \(4\) price information open, high, low and close)

2. Realized measures (use all available intraday prices, so called high–frequncy data or tick–by–tick data)