WebCab Portfolio for .NET v5.0 Demo

Volatility.HistoricalEstimate Method 

Evaluates the historical estimate of the present volatility.

public double HistoricalEstimate(
   double[] assetPrices
);

Parameters

assetPrices
An array of the assets price at the end of each interval. Note that if we use daily values of the asset price then this methods will return an estimate of the daily volatility.

Remarks

This procedure uses the price data at the end of equal time intervals of an investment asset which does not pay dividends or interest payments in order to estimate its present volatility per interval. The number returned is the estimated (present) volatility per interval expressed in decimal format (i.e. 1 percent = 0.01). Hence if daily values of the assets price where used then this method will return the historical estimate of the daily volatility.

Choosing the number of historical points used

The historical estimate is evaluated using a given number of historical values of the assets market price. Care should be taken when deciding on the number of historical values to use within the historical estimate of the present volatility. A balance needs to be made between using a large sample (resulting in the small standard error) and a smaller sample which does not take too distant historical values which may not fully reflect the present market dynamics. As a rule of thumb the number of days used in order to historical estimate the present daily volatility should (in generally) be between 90 and 180 days.

See Also

Volatility Class | WebCab.Libraries.Finance.Portfolio Namespace | HistoricalEstimateWithDividends