Historical Volatility Measured from High and Low Prices
Summary
Historical volatility describes how widely an instrument’s returns vary over a selected period. The document presents standard deviation as a common way to measure this dispersion and explains that higher readings indicate larger price fluctuations and therefore greater risk exposure. Volatility can accompany either rising or falling prices, so the measure does not indicate market direction.
This variant calculates volatility from the ratio of high to low prices rather than from closing prices, making it distinct from a conventional historical volatility indicator. The text offers no formula, parameter guidance, comparisons, or empirical evidence for the high-low method. It therefore serves as a brief conceptual description; readers would need additional information to reproduce the calculation or assess its behavior across markets and timeframes.
Key ideas
- Historical volatility measures the dispersion of price returns over a chosen period.
- Standard deviation is a common, but not exclusive, way to calculate volatility.
- Higher historical volatility indicates larger price fluctuations, not a particular direction.
- This version uses high and low prices instead of closing prices.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.