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THE DOCTOR wrote:
>
> If your building a trading system to "key" on volatility it would depend
> on what you are looking to identify. If you calculate an implied off a
> particular series and compare it to some other series.....as long as the
> same points in time are used......I WOULD assume the condition could
> wash out.
Doctor,
Yes, the system uses fixed relational points (if there is such a
thing :) ). In a nutshell, it rates the implied against longer term
contractions of vol.(duh) Then the levels are compared to deviation sets
in order to ascertain statistical veracity. Finally, the levels are
compared to mathematical representations of "fear"(emotion) in the
market. It is an interesting approach. Now I have to get it to
work. :)
I'll snoop around for a MonteCarlo generator. the problem with the
ones developed for EXCEL, is that it is not a "true" MC engine. Or
so I have heard anyway.
I was wondering, would you happen to know what the general method for
computing the Volatility in the BS formula is?
Is the annualized vol calculated by finding the true average of
a 250 day cycle, or is the general formula something like finding
a variance of a 3 day vol average, and then timesing the mess by
16? If traders are using an exponential model, then looking at 3
day sets of volatility might prove very interesting. :) Could this
be the source of our "fat-tail" problem???
Walt Downs
CIS Trading
http://cistrader.com
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