Modeling intraday volatility of European bond markets: a data filtering application
Zhang, H. and Dufour, A.
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1016/j.irfa.2019.02.002 Abstract/SummaryThis paper studies the intraday volatility of European government bonds under the framework of the multiplicative component GARCH model (Engle and Sokalska, 2012). Intraday return volatility is specified as the product of daily volatility, intraday seasonality, and a unit GARCH process. The model is applied to 10-year European government bonds during the sovereign debt crisis. We observe large transitory intraday volatility often due to illiquidity effects and outliers. We suggest a flexible and effective procedure for jointly filtering mid-quote prices and estimating volatility models. Finally, we show that intraday data contain relevant information for daily volatility forecasts.
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