how do you do an exponential moving average vol calculation?

Discussion in 'Technical Analysis' started by mizhael, Jul 21, 2010.

  1. Hi all,

    I know how to calculate the EMA:

    EMA_t = a*EMA_{t-1} + (1-a)*P_t

    but how to calculate the EMVol (exponential moving volatility or standard deviation)?

    It cannot be:

    EMVol_t^2 = a*EMVol_{t-1}^2 + (1-a)*P_t^2,

    because this is assuming the mean is zero.

    I was thinking about the following:

    EMVariance_t^2 = a*EMVariance_{t-1}^2 + (1-a)*P_t^2,
    EMA_t = a*EMA_{t-1} + (1-a)*P_t,

    then

    EMVol_t^2 = EMVariance_t^2 - EMA_t^2

    then we obtain EMVol_t.

    Any comments?
     
  2. Dude. Stdev is just the mean divided by the number of items. Or divided by (number of items minus one) when the number is less than twenty.

    ...

    your list of numbers: 1, 3, 4, 6, 9, 19

    mean: (1+3+4+6+9+19) / 6 = 42 / 6 = 7

    list of deviations: -6, -4, -3, -1, 2, 12

    squares of deviations: 36, 16, 9, 1, 4, 144

    sum of deviations: 36+16+9+1+4+144 = 210

    divided by one less than the number of items in the list: 210 / 5 = 42

    square root of this number: square root (42) = about 6.48
     
  3. Gah. Of course I meant to say the sum of the squared deviations divided by the number of items.