Yang–Zhang Volatility Estimation from OHLC Prices

Summary

The document presents a Yang–Zhang volatility estimator built from open, high, low, and close prices. It separates the overnight return from intraday price movement, combines the variance of overnight returns with close-to-open variance and the Rogers–Satchell range estimator, and applies a weight to combine the latter components. The result is an estimate of recent volatility, with a longer moving average displayed as a comparison series. The example specifies a 20-observation estimation window and a 200-observation averaging period.

The method is offered as a volatility indicator relevant to options analysis, and the code is described as adapted from AmiBroker. No asset, sampling interval, empirical comparison, or trading performance is provided. The excerpt points to an explanatory paper but does not discuss implementation choices such as annualization or handling missing and invalid OHLC values, so users must resolve those details for their own data and platform.

Key ideas

• The estimator uses OHLC prices to measure volatility while accounting for overnight and intraday movements.
• It combines overnight-return variance, close-to-open variance, and a Rogers–Satchell range estimate.
• A weighted combination produces the volatility estimate, which is shown alongside a longer moving average.
• The example uses a 20-observation calculation window and a 200-observation average period.
• The document provides no performance evidence or implementation guidance for annualization.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.