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 |