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Quantitative Finance · Glossary

What is Bipower variation?

Definition 21.9 Quantitative Methods · Chapter 21 — High-Frequency Econometrics

Bipower variation (Barndorff-Nielsen and Shephard, 2004) is π2∑i∣ri∣∣ri−1∣\frac\pi2\sum_i|r_i||r_{i-1}|: products of adjacent absolute returns, scaled by 1/E∣Z∣2=π/21/\E|Z|^2 = \pi/2.

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