Historical Volatility Estimation and Probability-Based Risk Costs
Summary
The i-VaR95 indicator presents historical volatility and a way to estimate risk costs at a chosen probability level. It describes three volatility approaches: a simple equally weighted moving average, an exponentially weighted moving average, and a high-low estimator based on Parkinson's method. These alternatives offer different ways to summarize variation in past prices, with the high-low approach using price extremes.
The document provides no formulas, parameter settings, asset-specific examples, validation, or performance results. It does not explain how the probability-based risk cost is calculated or establish that any estimator forecasts future volatility accurately. The indicator was first implemented for MetaTrader 4 and published in 2009; users should treat the description as a brief feature overview rather than a complete risk model specification.
Key ideas
- The indicator displays a measure of historical volatility.
- It offers simple and exponential moving-average approaches to volatility estimation.
- A high-low approach uses Parkinson's volatility estimator.
- It can also estimate risk costs at a selected probability level.
- The description does not provide formulas or evidence about forecasting accuracy.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.