Yang-Zhang Volatility Node
Advanced OHLC Volatility Estimator
Yang-Zhang Volatility is an advanced estimator combining high-low range (Parkinson), close-to-close volatility, and opening context (Rogers-Satchell) into a single robust estimate. It's considered one of the most accurate volatility estimators for option pricing, capturing true market volatility without biases from any single price component.
Formula
Parameters
| Parameter | Default |
|---|---|
| period | 20 |
Use Cases
1. Gold Standard Option Pricing
Most accurate volatility input for Black-Scholes and advanced option models.
2. Strategy Backtesting
Superior volatility assumption for simulating strategy performance.
3. Risk Model Calibration
Calibrate portfolio risk models with highest quality volatility estimates.
4. Realized vs Implied Analysis
Compare YZ realized volatility to implied volatility for mispricings.
Advantages & Limitations
Advantages
- • Most accurate OHLC estimator
- • Handles overnight gaps correctly
- • Proven for option pricing
- • Robust across market conditions
Limitations
- • Requires OHLC data
- • Complex calculation
- • Needs sufficient history
Tips & Best Practices
📊 Use for Options
Input YZ volatility directly into option models for robust Greeks calculation.
⚡ Level Set with Implied Vol
YZ should be ~80-90% of implied vol under normal conditions.
💰 Historical Tracking
Track 100-bar YZ baseline for regime identification and backtesting.
⚠️ Validate Calculations
Cross-verify YZ against other methods periodically to ensure correctness.
Related Indicators
Garman-Klass Volatility
Similar OHLC volatility estimator, simpler than YZ
Rogers-Satchell Volatility
Component of YZ; gap-aware estimation
Parkinson Volatility
High-low component of YZ method
Standard Deviation
Close-to-close component of YZ