My boss came to me today with "how do I convert this monthly vol to annual?". This is by far not the first time someone asked me to convert x-period volatility to y-period volatility. If you're having troubles doing this, here is a simple trick to remember: figure out the multiplier as if scaling were linear, and take the square root of that multiplier. For example, returns scale linearly with time. If someone gives you a monthly returns to convert to annual, you would simply multiply it by 12. So, in the case of converting monthly to annual volatility multiply it by √12. If someone gives you annual returns and asks you to calculate daily returns you would divide it by 252. To convert annual volatility to daily volatility divide it by √252.

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P.P.S. To convert:

Daily to weekly | -> | multiply by √5 |

Daily to monthly | -> | multiply by √21 |

Daily to quarterly | -> | multiply by √63 |

Daily to annual | -> | multiply by √252 |

Weekly to daily | -> | divide by √5 |

Weekly to monthly | -> | multiply by √4 |

Weekly to quarterly | -> | multiply by √12.5 |

Weekly to annual | -> | multiply by √50 |

Monthly to daily | -> | divide by √21 |

Monthly to weekly | -> | divide by √4 |

Monthly to quarterly | -> | multiply by √3 |

Monthly to annual | -> | multiply by √12 |

Quarterly to daily | -> | divide by √63 |

Quarterly to weekly | -> | divide by √12.5 |

Quarterly to monthly | -> | divide by √3 |

Quarterly to annual | -> | multiply by √4 |

Annual to daily | -> | divide by √252 |

Annual to weekly | -> | divide by √50 |

Annual to monthly | -> | divide by √12 |

Annual to quarterly | -> | divide by √4 |

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I have weekly volatilities over 370 weeks, I like to convert this into an annulized volatility..How does this work?

ReplyDeleteThere are 52 weeks in a year, so divide the weekly volatility by √52.

ReplyDeletemultiply it by root 52, not divide

ReplyDeleteYes, anonymous, you're correct. From weekly to annual you need to multiply by √52

ReplyDeleteI have daily volatility. How can I convert it to monthly volatility? How about multiply it by root 30? Thank you for your help.

ReplyDeleteBetter multiply by sqrt(21) - approximate number of trading days in a month.

ReplyDeleteThis is always a debatable issue

Deletethat how much Days should use to

convert Daily volatility to other specifice time period as

(one week or month , year etc

Because as India's Top exchange

* NSE * Uses √365 to transform

Daily Volty to annulized Volty

But in US they use √252

So my opinion is to follow the exchange in which one is trading

Plz share your opinion

I have two questions.

ReplyDeleteHow can I convert monthly volatility to quarterly volatility?

How can I convert daily volatility to quarterly volatility?

Thank you in advance

I have daily volatility how can i convert it in hourly?

ReplyDeleteDivide by sqrt(6.5). 6.5 represents number of trading hours.

Delete