Yes, that's right. This is a parametric method, which makes an assumption about the returns distribution, which is OK for linear instruments (i.e. stocks and futures), it doesn't work for non-linear instruments (i.e. options), however.
IV_Trader Correct. But, in order to calculate the volatility of a portfolio of stocks, you must use the correlation values between the component stocks.
MTE , thanks - yes , this is for long stocks only. PT , thanks - so I am back to correl between stocks again ?....damn. Anyway , I attached excel file just in case if someone have free time and want to help me out. All , thanks again for your help !
Why is correlation such a problem for you? You can find the theory on portfolio correlation on wiki You can also create a time series of portfolio returns rather than individual stocks, then you avoid the whole correlation thing, cause you already have portfolio data.
Here's a "quick and dirty" way we do spot checking of HV for a particular stock at our firm: We have an internal function to pull the last (x) days of closing prices, then start with the second day - in the spreadsheet, this would be D3 LN(D3/D2) drag and paste over the remainder so the formula calcs as shown in spreadsheet.. Look at cell E54 here, do CTRL-SHIFT-ENTER to perform the calc Then, it's the SQRT(E54*252) - 252 trading days in a yr roughly That will give you a 'rough' estimate of HV (in this case, 50D HV) HTH....
hello, I would like to ask for help about variance-co. VaR calculations. I found a interesting video about how to calculate VaR in excel for two assets but I don't really know in details how to calculate it for more assets( 3 and more+ ). youtube.com/watch?v=YR2MijzLRPo Can anyone help me with a explanation about how to calculate VaR for more assets? Thank you in advance.