Realized variance

Realized variance or realised variance (RV, see spelling differences) is the sum of squared returns. For instance the RV can be the sum of squared daily returns for a particular month, which would yield a measure of price variation over this month. More commonly, the realized variance is computed as the sum of squared intraday returns for a particular day.

The realized variance is useful because it provides a relatively accurate measure of volatility[1] which is useful for many purposes, including volatility forecasting and forecast evaluation.

  1. ^ Andersen, Torben G.; Bollerslev, Tim (1998). "Answering the sceptics: yes standard volatility models do provide accurate forecasts". International Economic Review. 39 (4): 885–905. CiteSeerX 10.1.1.28.454. doi:10.2307/2527343. JSTOR 2527343.