<aside> ℹ️ Realized volatility for the same lookback window depends on how frequency you sample it.

In this document, you will:

• learn to compute realized volatility
• appreciate the difference between the sampling window and lookback
• learn to annualize realized volatility
• examine market data to see how realized volatility varies with the sampling period </aside>

Introduction

These short posts explain the relevant computations. If you have ever computed a standard deviation, you are 99% of the way there.

Computing Realized Volatility

Annualizing Realized Volatility

Now we compute realized volatilities on actual historical prices to see what we can learn.

Data Exploration

Setup

Example using AAPL

Chartbooks for various tickers

Concluding thoughts

The most general results applied to every symbol:

• For a given lookback, less frequently sampled vol for a given lookback is biased lower. This echoes an earlier post Risk Depends on the Resolution
• However, in every case, the slower the sampling frequency (ie every 4 weeks instead of every 1 week), the more volatile the realized vol itself is compared to the daily sampled vol.