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To: Tom K. who wrote (1291)	1/18/2000 7:27:00 PM
From: RoseCampion	Read Replies (1) \| Respond to of 8096

To get it to less than an annual period like daily, divide by the square root of the time period (252(?) trading days). Gad, I hope my memory is right..... can anyone else confirm? Tom, I think you are correct: std_dev = annual_volatility x sqrt(days/365) x current_price or more accurately: std_dev = annual_volatility x sqrt(trading_days/252) x current_price So what's the formula to get the second standard deviation during a particular time period? It can't be just 2x the first one, can it? (which would be below zero on the low end for most of the stocks I follow!) -Rose-

To: Tom K. who wrote (1291)	1/18/2000 11:52:00 PM
From: manohar kanuri	Read Replies (2) \| Respond to of 8096

If volatility is 20% on a $50 stock your one std. dev. would be $20 (20% on both sides of the "mean" of 50, ie., 40 to 60). So at the end of one year 20x3 would capture 99.?% of possible price outcomes. You'll have to jog something in there to fit it into a lognormal distribution so you don't end up with a price less than zero on the downside. Can't recall offhand the whys and wherefores of how the model accomplishes that; I think it had something to do with relative changes being normally distributed and absolute changes lognormally distributed? For estimations, implied volatility = 1SD works fine for me. Such sloppiness probably wouldn't work in LTCM? Oh wait, they went belly up.... You're right about deriving the daily from the annual number.