NumXL 1.67 MARTHA public availability

Volatility 102

This week, we continue our on-going series on volatility modeling and forecast. In this issue, we start by defining the various terms in an asset’s return time (e.g., holding period) and explain the multi-period forecast of returns and volatility. Finally, we define the different types of volatility terms (e.g. local volatility, term structure, long-run and forward volatility) that we will come across in our future volatility modeling.

Why do we care? The concepts discussed here are pivotal to a solid understanding of financial time series volatility. The concepts are not unique to one model, but rather generic and applicable to the entire volatility modeling domain.

Volatility 102 – Types and Definitions

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