Historical volatility is the measure of actual price movement for the stock in the past. There are several ways to calculate historical volatility, and this platform makes use of the two most popular:
- Close-to-close volatility, which is the default historical volatility referenced throughout the tools. It is calculated using the closing price of the stock on each trading day for a calendar period leading up to the most recent trading close.
- Parkinson volatility is calculated using the high and low prices of the stock on each trading day for a calendar period leading up to the most recent trading close.
Historical volatility terms are expressed in calendar days and may be calculated for any term for which there is data. When the term is not specified, it should be assumed the term is 30 days. Note that these calendar durations are approximations based on a predefined set of trading days over that calendar period as defined in the table below.
|Calendar Days||Trading Days|
Based on this table, an 60-day historical volatility would be calculated using the close price differences between the last 41 trading days and the close prices on their respective previous trading days. By standardizing on this methodology, the historical volatility of any given duration can be cleanly compared with the other historical or implied volatilities of the same duration without having to consider the conversion between calendar and historical days or non-trading calendar days, such as weekends or holidays.
All closing prices are obtained using the CRSP methodology.