Volatility

Tags: quantitative-finance

The volatility \(\sigma\) is the standard deviation of the average annualised returns:

\[ \sigma = \sqrt{\frac{1}{(M-1)\delta t}\sum_{i=1}^{M}(R_{i}-\overline{R})^{2}} \]

Symbol Description
\(M\) Number of time steps
\(\delta t\) Size of time step
\(R_{i}\) Return at time step \(i\)
\(\overline{R}\) Mean return