Page 3 - Calculating Historical Volatility flip_Float

TABLE 1 10 day historical volatility

Table 1 shows the closing price in column C. As you move to the right you can see all the
calculations. Each step is shown separately for educational purposes. In practice you can nest the
equations down to three columns.

From Column C (the closing price of the asset) we continue..
In Column D you see the NATURAL LOGARITHM of the daily percentage change

In Column E you see the 10 day average of Column D
In Column F you can see the deviation from the mean(average)

In Column G you can see the deviation squared followed by

In Column H the sum of the squared deviations
In Column I The result of Column H is divided by the number of changes in the sample (9)

In Column J The Square Root of Column I brings us to the daily volatility (based on the last 10 days
of closing prices)

In Column K The daily volatility multiplied by the Square Root of the number of Trading days in a
year (roughly 252) results in the ANNUALIZED 10 DAY HISTORICAL VOLATILITY
Today’s 10 day historical volatility is 32.48% (annualized). In practice, one typically looks at a time
series of historical volatility numbers to ensure the current 10 day sample doesn’t have an outlier
event (or a very slow period). Historical Volatility such as you would see on Bloomberg by pressing
HVT [go] or HVG [go] is calculated like a moving average using the number of days one desires.