Problems on Volatility and Daily Volatility

Formula Used:

Volatility for Time Horizon(T) = Daily Volatility X √(T)

T is Time

Checkout Problems:

1. If per annum volatility is 30% and nos. of trading days per annum be 250, how much will be daily volatility?
a. 1.90%
b. 6.95%
c. 10.95%
d. 13.95%

Solutions: 

Annual Volatility = 30%
Trading days in year as per question is 250 

hence daily Volatility =   Volatility for Time Horizon / √(T) 

                                   = 30/ √250   =1.89% Hence answer is A.

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2.If daily volatility of a Security is 2%, how much will be monthly volatility?
a. 1.90%
b. 6.95%
c. 10.95%
d. 13.95%

 Solution:


Annual Volatility = Daily Volatility X √(T)
                             = 2* √(30) = 10.95%

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3. Daily Volatility of  a Stock is .5% . What is 10 day volatility?

Solution: 


Annual Volatility = Daily Volatility X √(T)
                            = .5 *  √(10) =1.58%