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How is historical implied volatility calculated?
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How is historical implied volatility calculated?

  #21 (permalink)
Trading Apprentice
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VIX Calculation Step by Step
  1. Select the options to be included in the VIX calculation.
  2. Calculate each optionís contribution to the total variance of its expiration month.
  3. Calculate the total variance for the first month and the second month.
  4. Calculate 30-day variance by interpolating or extrapolating the two variances, depending on the time to expiration of each.
  5. Take the square root to get volatility as standard deviation.
  6. Multiply the volatility (standard deviation) by 100.
  7. The result is VIX.

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  #22 (permalink)
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Can you demonstrate an example of the calculation? Without a math background, it's hard for me to visualize how to implement some of the steps, like #2

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