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Wednesday, November 17, 2010

Historical Volatility – Part 2: Formula to Calculate HV

Go back to Part 1: Definition of Historical VolatilityAs mentioned in Part 1, to obtain Historical Volatility, we need to calculate the standard deviation of the price returns using historical data (which can be in terms of daily, weekly, monthly, quarterly or yearly) over a certain period.Commonly, the daily price data for the period of 10 days, 20 days, or 30 days are used.Theoretically, the formula to calculate Historical Volatility (i.e. standard...