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Historical High-Low Volatility: Parkinson

Submitted by cahn on 20 September, 2009 - 1:20am

The  Parkinson formula for estimating the historical volatility of an underlying based on high and low prices.

$ \sigma = \sqrt{\frac{Z}{n 4 \ln 2}\sum_{i=1}^{n}\left(\ln \frac{H_i}{L_i}\right)^2} $

where

$ \sigma $ = Volatility
$ Z $ = Number of closing prices in a year
$ n $ = Number of historical prices used in the volatility estimate
$ H_i $ = The high
$ L_i $ = The low

http://www.sitmo.com/eq/173

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