St deviation in Black Scholes

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August 21, 2017 at 6:28 am #402717
abbas7796
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hello John

the st deviation in Black Scholes questions is normally given as variance %. however is this annual?

suppose if the question says that the monthly st deviation of shares is 25%. in this case what number do we use for our formula for Black Scholes?

please help

thanks
August 21, 2017 at 10:22 am #402744
John Moffat
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It is annual.

If you were given the monthly variance, then the annual variance is 12 times the monthly variance (and therefore the annual std deviation is the monthly std deviation x the square root of 12).
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