Calculating implied volatility can be difficult if you dont have a spreadsheet handy. Fortunately, many tools are

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Calculating implied volatility can be difficult if you don’t have a spreadsheet handy.

Fortunately, many tools are available on the Web to perform the calculation; for example, www.option-price.com contains option calculators that also compute implied volatility.

Using daily price data (available from finance.yahoo.com), calculate the annualized standard deviation of the daily percentage change in a stock price. Try calculating standard deviation using historical data covering

(a) 60 days,

(b) 120 days, and

(c) 180 days. For the same stock, use the option-price.com Web site to calculate implied volatility. The input for the risk-free rate may be found at www.bloomberg.com/markets/rates/index.html. Option price data can be retrieved from www.cboe.com.

Which sample period for calculating historical standard deviation seems most correlated with implied volatility?

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Related Book For  book-img-for-question

ISE Investments

ISBN: 9781260571158

12th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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