[R-SIG-Finance] Excessive data needed for volatility{TTR} calculation?

[Joshua Ulrich]

Hi James,

On Sat, May 28, 2011 at 9:44 AM, J Toll <jctoll at gmail.com> wrote:
> Joshua,
>
> On Sat, May 28, 2011 at 7:13 AM, Joshua Ulrich <josh.m.ulrich at gmail.com> wrote:
>> Actually, because the first return in the moving window would always
>> be NA, it should be:
>> sqrt(N/(n-2)*sum((r[-1]-mean(r[-1]))^2))
>>
>> which yields the same result as:
>> last(sqrt(N) * runSD(r, n-1))
>
> I've been trying both lines of code and unfortunately I'm not getting
> the same results.  The first line seems to only work properly for me
> in those instances when NCOL(OHLC) = n.  For the more common situation
> where NCOL(OHLC) > n, you would want a rolling window of vol
> calculations.  I'm still thinking that the code should be:
>
> s <- sqrt(N) * runSD(r, (n - 1))
>
<snip>
>
> You may want to hold off on a patch in the short term.  I still think
> there might be an error in there.  I'm sorry to be such a nuisance
> about this, but thanks so much for your help.
>
> James
>

My last email wasn't very clear; I apologize.

I still agree with your suggestion and plan to use it as a patch.  The
first line in my prior email was to illustrate (and convince myself)
that your solution matched the formula here:
http://web.archive.org/web/20081224134043/http://www.sitmo.com/eq/172

And it only matches when NROW(OHLC) == n because your solution
operates on a rolling window and my first line operates on everything.
 Try something like this:

n <- 5
R <- cumprod(1+r)
FUN <- function(x) {
  r <- ROC(x); n <- NROW(x)
  sqrt(252/(n-2)*sum((r-mean(r, na.rm=TRUE))^2, na.rm=TRUE))
}
head(sqrt(N) * runSD(ROC(R), n-1),15)
head(rollapply(R, n, FUN, align="right", fill=NA),15)
n <- 10
head(sqrt(N) * runSD(ROC(R), n-1),15)
head(rollapply(R, n, FUN, align="right", fill=NA),15)

Sorry for the confusion.

Best,
--
Joshua Ulrich  |  FOSS Trading: www.fosstrading.com