quick basic q

Discussion in 'Options' started by erasmus, Feb 8, 2009.

  1. erasmus

    erasmus

    if you have a daily volatility of say 10% p.a. how do you spread that over say 2 days? It should be the case that spreading it over a longer time interval means it decreases. I think it has something to do with the modifications of that standard formula sigma1=sigma2*sqrt(T) where you can, for e.g., convert from 1 day to 2 day - but i think this is just annualising the figure.....I want to "spread" my 1 day vol over 2 days (or more...) ?
     
  2. MTE

    MTE

    I'm not sure what you mean by "spread it over 2 days", but if you have a daily annualised volatility of 10% then 2-day volatility will be 0.10*sqrt(2/365).