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2

I don't believe you will necessarily find a cite-able source as, I believe, this comes from a practical rather than theoretical motivation. As you know option prices are a function of: future prices, discount rates and implied volatility, volatility surface skew and other supple/demand factors. So when you are trading these instruments, you need to ...


2

It is all a matter of frequency. For instance if you want to get annual realized volatility you multiply your last expression by $\sqrt{(N*251)}$ or the second to last expression by $\sqrt{(251)}$. In other words, your last expression is the 5-min realized volatility whereas the second to last expression is the daily realized volatility.


7

Upon close reading, this appears to be 3 (interesting) questions, not one. I'm not sure if the mods have the tools needed to split it up, so I'm just going to write down the three questions as I see them and then deal with them one by one. Note, it is simpler for me to talk about variance instead of volatility. This has no material impact on the answer. ...


5

For How VIX works you can read this wonderful blog : http://onlyvix.blogspot.com/2011/09/intuitive-understanding-of-vix-formula.html It provide wonderful non mathematical explanation of the how vix is actually computed. Now comes to your last answer why vix is inversely related to market movement ? In simple words, if market is more volatile then ...


0

I'll address things in order as I encountered them in the question. First, your formula for RV only makes sense if $X_{t_i}$ is the log-price, not log-return. If this was just a mistype it would probably be best if you edited the question to correct it. If it is not a mistype, let me know, because then you have bigger problems... Answer 0: I have no idea ...



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