Standard approach to Estimating Volatility Define on as the volatility per day between day n-1 and day n, as estimated at end of day Define S: as the value of market variable at end of day i
Derivatives Dependent on a single Underlying Variable Consider a variable, 0, (not necessarily the price of a traded security) that follows the process d e S Imagine two derivative s dependent on e with prices f, and f2. Suppose