why is stdev converted to yearly?
In the MC: Forecasting Stock Prices, stdev is left as daily.
However, for MC:Euler Discretization, stdev is converted to yearly.
Why is that?
1 answers ( 0 marked as helpful)
Hi Ryan!
Thanks for reaching out.
Please accept my apologies for the terribly delayed response.
Again, it is a matter of representation. We should take into account the formula and the data we have at hand. If we have daily data and want to measure the average daily deviation, we take a daily standard deviation. Otherwise, we can use an annual standard deviation, if that's what we want to measure.
Hope this helps.
Kind regards,
Martin