Real-world equity calibration: a comparison of realised and expected volatility
Document ID: 2010-1725
Published on: 15th March 2010
Author: Frederic El Cherif
This note compares realised volatility with different measures of expected equity volatility. Realised equity volatility is the sum of expected and unexpected equity volatility. It is unobservable and we need to rely on an estimator. Any estimate will contain sampling and measurement error. It is also hard to decompose realised volatility into expected and unexpected volatility as volatility expectations are unobservable.
