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Stephane,
Historical volatility is a stinky way of forecasting volatility. If you
compare historical to implied to actual you'll find they are not really good
at forecasting. What are you trying to price. What time frame will your
OTC option be. If it is very long term the vol. calculation becomes much
less critical than the carry calculation. You would probably be better of,
if your instrument trades in a long dated market, of sampling the long
implied and using that. If it is a US equity I would go the longest leap
and draw an implied or if it trades in another marketplace I would sample
the longest dated product available. 9 years forward or 9 years back? 9
years forward is very rough ..... 9 years back I can calculate an actual ...
get an implied from the trading history of the derivatives and view a
historical from the trading history of the instrument .... however having
said that they would still be a mediocre database for a 9 year forward.
Stephane Rodigari wrote:
> Hi RTs,
>
> Can anyone tell me how to calculate an estimation of a 9 year volatility
> using historical volatility. I need to value OTC options and to control
> whether their implied volatility is acceptable.
>
> Regards,
>
> Richard
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