New volatility model captures whole-day market dynamics for better predictions.
The article introduces a new volatility model for financial data that considers market dynamics throughout the day. By using It^o diffusions, the model captures volatility information during both the close-to-open and open-to-close periods. The researchers developed a method to estimate model parameters for these two periods and tested its performance through simulations. The results show that the proposed model can better capture market dynamics and provide more accurate volatility predictions.