128 Estimating volatility from Historical Data (page 239-41) Take observations So, Sy on at intervals ofτ years 2. Calculate the continuously compounded return in each interval as u =n 3. Calculate the standard deviation s of the u. s y The historical volatility estimate is: 0= Options, Futures, and Other Derivatives, Sth Edition C 2002 by John C. Hull12.8 Options, Futures, and Other Derivatives, 5th Edition © 2002 by John C. Hull 8 Estimating Volatility from Historical Data (page 239-41) 1. Take observations S0 , S1 , . . . , Sn at intervals of t years 2. Calculate the continuously compounded return in each interval as: 3. Calculate the standard deviation, s , of the ui ´ s 4. The historical volatility estimate is: u S S i i i =       − ln 1 t s = s ˆ