Stock Option Volatility

patelxhp's picture
Rank: Chimp | 2

I need some help regarding historical stock volatility, any help would be greatly appreciated! I have six and half years worth of daily closing prices for a bank stock. I calculated the historical volatility using the natural log of current day over prior day for all the 1683 days. I then took the standard deviation of all the natural logs and multiplied it by squareroot of 252 (trading days in a year) to come with with an annual volatility figure. My question is:

A) The volatlity tells me that the stock could go up or down volatility %centage a year from now from the trading price of today. Does this also mean that year over year for 6 and half years..this stock could go up or down this percentage? how do i calculate the volatility for say 3 years or 6 years?

B) I have a bank that has only been public for 2 years...what kind of assumption can i make or can i use a peer group bank that has been trading for 6 years to make a prediction for the bank that has only been trading for 2 years...if so, how can i do this? is there a weighted volatility i need to use for the 2 year bank and 6 year bank combined?

Any help would be greatly appreciated! Thanks alot!

Hemal-