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  3. Introduction to Portfolio Risk Management in Python

Exercise

Annualizing variance

You can't annualize the variance in the same way that you annualized the mean.

In this case, you will need to multiply \( \sigma \) by the square root of the number of trading days in a year. There are typically 252 trading days in a calendar year. Let's assume this is the case for this exercise.

This will get you the annualized volatility, but to get annualized variance, you'll need to square the annualized volatility just like you did for the daily calculation.

sigma_daily from the previous exercise is available in your workspace, and numpy is imported as np.

Instructions

100 XP
  • Annualize sigma_daily by multiplying by the square root of 252 (the number of trading days in a years).
  • Once again, square sigma_annualized to derive the annualized variance.