Estimating Future Daily Volatility

Discussion in 'Trading' started by asap, Mar 31, 2012.

  1. asap


    What (method, tools, approach) do you guys recommend to estimate future volatility on the main indexes on a daily basis? E.g. I want to be able to compute an estimation of tomorrow's index volatility based on historical data. The IV figure doesn't help much because it refers to either monthly or weekly periods, while I am interested in estimating daily vola. Even though the square of days-till-expiry could be used to estimate an equivalent daily implied vola, I am wondering if I could go any further, as in my experience, that doesn't cut it.

    I'd appreciate if any of the volatility traders out there add their suggestions.

  2. Lornz


    Please hang on while I fetch my copy of "The Holy Grail" from the bookshelf...
  3. asap


    i understand the irony but the fact is volatility is highly autoregressive and that makes it more prone to be estimated than say, direction. if that wasn't the case, liquid options trading wouldn't exist a all. so my question is what tools, methods should i use to estimate daily vola?
  4. Lornz


    Absolutely! I was merely making a friendly jest.

    The question still remains: Why would anyone want to share that information on a public message board?

    By the way, there are plenty of papers on the subject. With a little effort, one might find something useful.

    Good luck!
  5. newwurldmn


    implied vol / 16
  6. GARCH and its variants is one of the most traditional methods. There are many others.
  7. If you're estimating daily, then scale it the usual way- newwurldmn's response will suffice.

    Garch is cool but then there's about a billion different GARCH variants.

    Sometimes I feel like GARCH is like a pimped out academic version of Technical Analysis.