For those interested in options pricing and volatility indicator, here is one that draw recent volatility based on High, Low, Open and Close prices.
For more explanation see this paper : http://atmif.com/papers/range.pdf
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//parameters // n = 20 // averageP = 200 No = log( open ) - log( close[1] ) // normalized open Nu = log( high ) - log( open ) // normalized high Nd = log( low ) - log( open ) // normalized low Nc = log( close ) - log( open ) // normalized close Vrs = 1 / n * Summation[n]( Nu * ( Nu - Nc ) + Nd * ( Nd - Nc )) // RS volatility estimator Noavg = 1 / n * Summation[n](No) Vo = 1 / ( n - 1 ) * Summation[n]( SQUARE( No - Noavg ) ) Ncavg = 1 / n * Summation[n]( Nc ) Vc = 1 / ( n - 1 ) * Summation[n]( SQUARE( Nc - Ncavg ) ) k = 0.34 / ( 1.34 + ( n + 1 ) / ( n - 1 ) ) Vyangzhang = Vo + k * Vc + ( 1 - k ) * Vrs avg = average[averageP](Vyangzhang) return Vyangzhang, avg as "average volatiliy" |
code adapted from AmiBroker
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It seems that the formula needs a SQRT (that is Vyangzhang = SQRT(…))
I think to have annualized view of this historical volatility you will need :
Vyangzhang = SQRT(Vo + k * Vc + ( 1 – k ) * Vrs) *SQRT(252)