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Question about volatility
- Thread starter MrBerka
- Start date
Quote from MrBerka:
How do we calculate a stocks normal distribution 20 days from now if we only know the intraday volatility?
The share is trading at 50. The average intraday volatility (intraday high-low) is 3 % with a 1 % standard deviation (yes, itâs a hypothetical question).
You can't calculate the stock's "normal distribution", you can only calculate a moment of a normal distribution or it's functions. In other words - what are u tryign to calculate...volatility, variance, CDF, PDF? If you need the volatility for 20 days, then:
(0.03/(sqrt(1/252)))*sqrt(20/365)
Which is about 11% according to google.
You sure about that genius? Even assuming the 3% is an annualized volatility (which it isn't; the poster said it's intraday vol), your equation is pretty wrong. Assuming your date count convention (which is pretty inconvenient, but let's leave that side),
3% = DailyVol * Sqrt(252)
DailyVol = 3%/Sqrt(252)
20D Vol = Sqrt(20)*DailyVol
Using your formulation (the second part where you try to rescale into 20-day), you get
3%/sqrt(1/252) = DailyVol
3% = DailyVol*Sqrt(1/252)
Annual Variance = Daily Variance / 252
Doesn't make a lot of sense does it?
3% = DailyVol * Sqrt(252)
DailyVol = 3%/Sqrt(252)
20D Vol = Sqrt(20)*DailyVol
Using your formulation (the second part where you try to rescale into 20-day), you get
3%/sqrt(1/252) = DailyVol
3% = DailyVol*Sqrt(1/252)
Annual Variance = Daily Variance / 252
Doesn't make a lot of sense does it?
Quote from thenmmm:
You can't calculate the stock's "normal distribution", you can only calculate a moment of a normal distribution or it's functions. In other words - what are u tryign to calculate...volatility, variance, CDF, PDF? If you need the volatility for 20 days, then:
(0.03/(sqrt(1/252)))*sqrt(20/365)
Which is about 11% according to google.
Quote from sjfan:
You sure about that genius? Even assuming the 3% is an annualized volatility (which it isn't; the poster said it's intraday vol), your equation is pretty wrong. Assuming your date count convention (which is pretty inconvenient, but let's leave that side),
3% = DailyVol * Sqrt(252)
DailyVol = 3%/Sqrt(252)
20D Vol = Sqrt(20)*DailyVol
Using your formulation (the second part where you try to rescale into 20-day), you get
3%/sqrt(1/252) = DailyVol
3% = DailyVol*Sqrt(1/252)
Annual Variance = Daily Variance / 252
Doesn't make a lot of sense does it?
so an idiot like you doesn't have any other job than stalking internet people?
Anyway i am busy right now.
So 252|| 365 is the right way to calculate it and NOT 252 || 252.
http://en.wikipedia.org/wiki/Volatility_(finance)
cheers
Quote from Hook N. Sinker:
Nobody knows the volatility of anything 20 days in the nonexistent future.
true, but it seems that he is trying to predict that volatility in a 'technical analysis' fashion based on historical volatility. I am not saying this is the right approach - but it's the best one based on his/her question.
What stalking? I'm correcting your formula mistake. You might actually want to read the link you put there: it confirms your mistake. Note, the numerical example has monthly vol = annual vol MULTIPLIED by sqrt(1/12).
The analogous daily vol is then daily vol = annual vol * sqrt(1/252), not annual vol / sqrt(1/252) as you put it.
Don't hide behind the date count convention when you completely mis-scaled volatility.
The analogous daily vol is then daily vol = annual vol * sqrt(1/252), not annual vol / sqrt(1/252) as you put it.
Don't hide behind the date count convention when you completely mis-scaled volatility.
Quote from thenmmm:
so an idiot like you doesn't have any other job than stalking internet people?
Anyway i am busy right now.
So 252|| 365 is the right way to calculate it and NOT 252 || 252.
http://en.wikipedia.org/wiki/Volatility_(finance)
cheers
Quote from MrBerka:
The share is trading at 50. The average intraday volatility (intraday high-low) is 3 % with a 1 % standard deviation (yes, itâs a hypothetical question).
I assume you mean that the average intraday high to low averages 3% of the share price. What do you mean by "1% standard deviation?"