1.5 Historical data and modeling

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1.5 Historical data and modeling

Having loosely introduced the volatility s as a measure of the investment risk, it is time now to develop an intuition for this important quantity and show how the drift and the volatility of a spot price may be calculated as averages from historical data from the markets.

Subsections

1.5.1 Drift and volatility of market prices
1.5.2 Moving averages: UWMA, EWMA, GARCH $\diamondsuit$
1.5.3 Maximum likelihood estimate of parameters $\spadesuit$