Calculating volatility percentage for a given time period

Question

I am looking at an EMEA liquidity report.

One measure I am interested in is the volatility. The report includes a list of various indexes and the "Average Volatility " for a period of 5 days expressed as a percentage.

I can't make sense of how this is calculated.

I have the underlying figures that allow me to try to calculate this metric, but I can't understand how it was calculated that FTSE100 had an Volatility of 59% between the between the 2nd and 6th of March. 59% percent of what??

Any leads/ideas as to how this metric can be found would be welcome.

Thanks

D Stanley · Answer

Volatility is typically expressed as an annualized standard deviation of periodic movements. so a "59% volatility" most likely means that there's a 68% (1 sd) chance that the index will move 59% (up or down) or less in 1 year (~252 business days). To convert an annual volatility to a daily one, you divide by the square root of 252 (# of trading days in a typical year), so the daily volatility for that period was
59% / sqrt(252) = 3.7%.

That means in that period there was about a 68% chance that the daily change is 3.7% or less (or, that there's a 32% change that the daily change will be more than 3.7%).

Calculating volatility percentage for a given time period

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