Definitions
In plain terms
It summarizes how much returns varied in the selected past sample and is often annualized for comparison.
Technical
The estimate requires return type, sampling frequency, window, mean treatment, weighting, annualization factor, missing policy, outlier policy, and causal cutoff.
Scope
It is backward-looking and does not guarantee future volatility.
Formula
sigma_ann = sqrt(A * mean((r_t - mean(r))^2))\sigma_{ann}=\sqrt{A\,mean((r_t-\bar r)^2)}| Symbol | Meaning | Unit |
|---|---|---|
A | annualization factor | periods per year |
r_t | observed period return | decimal return |
mean(r) | declared sample mean return | decimal return |
Output unit: annualized return volatility
Examples
- A governed methodology records realized volatility with its source, cutoff, units, parameters, and effective version.
Common misconceptions
- Realized Volatility does not have one universal implementation without the declared methodology, data basis, and constraints.
Concept relationships
Where this concept is used
Evidence and governance
- S&P Risk Control 2.0 Indices Methodology S&P Dow Jones Indices · first party methodology
Supports: preferred label, short definition, technical definition, formula
Limits: Authoritative for the named index family; it does not create a universal volatility-control formula or investment result.
- Fintech Builder Glossary Definition Contract The Fintech Builder · internal governed contract
Supports: variant distinction
Limits: Defines governed platform behavior rather than claiming these policies are universally prescribed by external McClellan methodology.
- Reviewed by
- fintech-builder-batch-004
- Last reviewed
- 2026-07-27
- Next review
- 2027-07-27
- Record status
- evidence reviewed
This record is evidence-reviewed and readable, but not yet promoted to published — it is served noindex,follow and excluded from the sitemap.