Calculating Historical Volatility

Vi is the initial investment value

Vf is the final investment value
.

ROILog > 0 is profit

ROILog < 0 is a loss

Doubling occurs when

Total loss occurs when .
This should be straightforward and I will calculate the weekly ROI for the S&P500. Why? Well I’m interested in calculating weekly HV so my Vi will be the week(1)‘s closing price and Vf will be week(2)‘s closing price. For the next iteration Vi will be the week(2)‘s closing price and Vf will be week(3)‘s closing price and so forth. Next I created an Excel Macro that would calculate the natural log and simultaneously calculate the HV for 10, 20, and 30 days using the standard deviation of the daily logarithmic returns multiplied by 252 (see related links below). There you have it, your very own weekly HV! Feel free to download the Excel macro and play with it. By all means, please critique my analysis and let me know if my logic is flawed! The more I learn about this, the more my ATS takes shape! Update: The Excel Macro matches the output from iVolatility.com for the 10, 20, and 30 day HV’s. Check! Related:

Historical Volatility

Calculating Volatility

Using Historical Volatility To Gauge Future Risk

An Introduction to Volatility and how it can be Calculated in Excel

Stochastic Process & Advanced Mathematical Finance