infonet-economy

Using readily available data on daily high and lows prices, a simple estimation method of the efficient price volatility and bid-ask spread is developed. The model relies on general assumptions and it provides a closed-form solution for an unbiased estimator of efficient volatility.
Moreover, it provides a better treatment of the volume effect caused by trading discontinuity and non-trading time. Using a comprehensive data set of high-frequency FX rates, it is shown that the liquidity estimator proposed is highly correlated with the actual bid-ask spread and other measures of market liquidity