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Thursday, May 26, 2011

Historical Volatility – Part 5: How To Annualise Standard Deviation

Go back to Part 4: Understanding Standard DeviationAs mentioned earlier, Historical Volatility is actually a standard deviation. The standard deviation can be calculated using historical price data in terms of daily, weekly, monthly, quarterly or yearly.Historical Volatility is then expressed in terms of annualised standard deviation of % price returns, so that it can be compared across different stocks, regardless of the stock price and period used...