WebCab Portfolio for .NET v5.0 Demo

Volatility.HistoricalEstimateWithDividends Method 

Calculates the historical estimate of the present volatility taking into account the dividends or interest payments of the underlying asset.

public double HistoricalEstimateWithDividends(
   double[] assetPrices,
   double[] dividendsPaid
);

Parameters

assetPrices
An array of the assets market value at the end of each interval. Note that if we use daily values of the asset price then this method will return an estimate of the daily volatility.
dividendsPaid
An array of the dividends (or interest payments) from the asset within each period. If we are estimating the daily volatility then the periods considered will correspond to days. The length of the array corresponding to the dividends (or interest payments) must have the same length as the array of asset prices used. If no payment is made within the i-th interval then the i-th element of the array in zero.

Remarks

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.

Exceptions

Exception TypeCondition
OptionExceptionThrown when the number of asset prices is not equal to the number of dividends.

See Also

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