[R-SIG-Finance] Scaling risk for irregularly spaced time series?

[markleeds at verizon.net]

  based on what i've been seeing, i totally misunderstood your question. 
i thought you had an hourly estimate based on
8 hours and wanted to get a daily estimate. my bad. it should teach me 
to keep my mouth shut.



On Fri, Oct 10, 2008 at  5:16 PM, Shane Conway wrote:

> Thanks!
>
> That's my problem: I can't rely on the observations being evenly
> spaced (hence my reference to "irregularly spaced").  Do most people
> interpolate their data so that it's regularly spaced first, and if so,
> won't that also bias the calculation?
>
> Any suggestions for how to produce a daily volatility calculation
> using an irregularly spaced intraday time series?  I'm not married to
> using the square-root rule if there's a better alternative...
>
>
> On Fri, Oct 10, 2008 at 5:06 PM, Chiquoine, Ben <BChiquoine at tiff.org> 
> wrote:
>> I believe Davids suggestion is correct if your 8 hours are 
>> consecutive.
>> This may be pointing out the obvious but if your observations are
>> unevenly separated throughout the day your return series will not be
>> hourly and if there is mean reversion or momentum (evidence of both 
>> have
>> been found in fx data depending on the frequency of observation) your
>> results will be biased.  Unfortunately I don't have a better way for 
>> you
>> to approach the problem this is just a heads up
>>
>> Good luck,
>>
>> Ben
>>
>> -----Original Message-----
>> From: r-sig-finance-bounces at stat.math.ethz.ch
>> [mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of
>> davidr at rhotrading.com
>> Sent: Friday, October 10, 2008 4:52 PM
>> To: Shane Conway; r-sig-finance at stat.math.ethz.ch
>> Subject: Re: [R-SIG-Finance] Scaling risk for irregularly spaced time
>> series?
>>
>> You basically said it: scale by the 'activity'.
>> If you are measuring activity for 8 hours and that is your day,
>> then sigma{1 hour} * sqrt(8) is your daily vol,
>> assuming lots of untrue things, of course ;-)
>>
>> -- David
>>
>> -----Original Message-----
>> From: r-sig-finance-bounces at stat.math.ethz.ch
>> [mailto:r-sig-finance-bounces at stat.math.ethz.ch] On Behalf Of Shane
>> Conway
>> Sent: Friday, October 10, 2008 3:41 PM
>> To: r-sig-finance at stat.math.ethz.ch
>> Subject: [R-SIG-Finance] Scaling risk for irregularly spaced time
>> series?
>>
>> I'm working with intraday FX price data (primarily hourly bars).  I
>> want to scale my volatility calculations up to the daily level.
>> Ordinarily I would us the square-root-of-time rule and multiple by 
>> the
>> sqrt(T).
>>
>> The question is: how do people deal with this scaling factor when the
>> time series is irregularly spaced?  If I apply sqrt(24) for hourly
>> data but I only have 8 hours of data (for instance), my calculation
>> will be way off.
>>
>> Thanks,
>> Shane
>>
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