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 |