Realized Volatility Defined
The Volatility Exchange defines realized volatility in two ways:
Layman’s definition: Realized volatility is the magnitude of daily price movements, regardless of direction, of some underlying, over a specific period.
Technical definition: Realized volatility is the daily standard deviation of log returns of an underlying asset, index, instrument, security, or ETF, over a defined period, with an assumed mean of zero, no degrees of freedom, and a constant 252-day annualization factor (regardless of the actual number of trading days within the year).
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