Volatility Ratio

Install and import#

npm install fintech-algorithms

import { volatilityRatio } from "fintech-algorithms/technical-indicators/range-and-volatility-indicators/volatility-ratio";

Signature#

volatilityRatio(input)

Volatility Ratio: the standard deviation of close-to-close simple returns over a short window divided by the same measure over a long window.

Parameters#

Returns#

TopicResult

series holds a single key, value, the short-over-long deviation ratio; latest.value is its last reading. The warm-up is long_period leading nulls, so ready_at is 20 at the defaults.

Warm-up#

The first `long_period` bars (20 at the defaults) positions are null. Returns are undefined on the first bar, so the long-window deviation only completes at index long_period rather than long_period - 1. value is also null on any bar where the long-window deviation is zero.

Errors#

• When parameters.short_period is not an integer >= 2 — throws Error
• When parameters.long_period is not an integer greater than short_period — throws Error
• When parameters.period is not an integer >= 2 — throws Error

Complexity: time O(n * long_period), space O(n).

Worked example#

executed Captured by running this function on the input its own test provides. Real output of real code — but not asserted against a published figure.

Input#

{
  "bars": [
    {
      "timestamp": "2024-01-02",
      "basis": "synthetic-unadjusted",
      "open": 100,
      "high": 101.45,
      "low": 98.695,
      "close": 100,
      "volume": 750000,
      "benchmark": 200
    },
    {
      "timestamp": "2024-01-03",
      "basis": "synthetic-unadjusted",
      "open": 101.49111452,
      "high": 103.38381693,
      "low": 100.05480022,
      "close": 101.78791214,
      "volume": 795117,
      "benchmark": 200.56326135
    },
    {
      "timestamp": "2024-01-04",
      "basis": "synthetic-unadjusted",
      "open": 102.45519048,
      "high": 104.6701838,
      "low": 100.91147007,
      "close": 102.9549389,
      "volume": 840234,
      "benchmark": 201.11020913
    }
  ],
  "parameters": {}
}

Call#

volatilityRatio(input)

Returns#

object with 9 fields: topic_id, title, state, ready, ready_at, series, latest, parameters, …

{
  "topic_id": "D07-F06-A05",
  "title": "Volatility Ratio",
  "state": "calculated",
  "ready": true,
  "ready_at": 20,
  "series": {
    "value": [null, null, null, null, null, null]
  },
  "latest": {
    "value": 0.593478196387429
  },
  "parameters": {},
  "diagnostics": {
    "causal": true,
    "input_count": 96
  }
}

Diagrams#

Calculation flow#

flowchart LR
    A["ordered OHLC observations with session calendar, previous "] --> B["Validate order, basis, and finite values"]
    B --> C["Apply the selected Volatility Ratio convention"]
    C --> D["Emit value, readiness, and diagnostics"]
    D --> E["Interpret descriptively; test outcomes separately"]
    B -->|invalid or insufficient| X["Withhold output with a reason"]

stateDiagram-v2
    [*] --> Waiting
    Waiting --> Ready: enough valid causal observations
    Waiting --> Rejected: malformed or unsupported input
    Ready --> Calculated: selected formula applied
    Calculated --> Interpreted: diagnostic and limitation retained
    Interpreted --> Ready: next observation arrives
    Rejected --> Waiting: corrected input and deterministic reset

How it works#

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References#

• TA-Lib function groups — see linked primary or authoritative record
• TA-Lib C/C++ API — see linked primary or authoritative record
• TA-Lib maintained source — see linked primary or authoritative record
• Evidence decision
• Level 1 evidence map

The rest of the Range and Volatility Indicators family#

• Normalized ATR and ATR PercentageWilder's Average True Range over period bars, and the same figure restated as a percentage of that bar's close.
• Chaikin VolatilityChaikin Volatility: the percentage change, roc_period bars apart, in an exponential moving average of the bar's high-low range.
• Ulcer IndexUlcer Index: the root mean square of the percentage drawdown from the running peak close, measured across a window of period …
• Relative Volatility IndexRelative Volatility Index: an RSI-shaped 0-100 oscillator that grades the rolling standard deviation of close recorded on up ba…
• Volatility Quality IndexVolatility Quality Index: accumulates each bar's true range signed by the direction of its close, then smooths the running tota…
• Average Daily RangeAverage Daily Range: the simple moving average of the bar's high-low range over period bars.
• Gap VolatilityGap Volatility: measures each bar's opening gap -- this open less the prior close -- and the rolling standard deviation of thos…
• Range Efficiency RatioRange Efficiency Ratio: the absolute net close-to-close move across period bars divided by the sum of the high-low ranges ove…
• High-Low Range PercentageExpresses the bar's high-low range as a percentage of its high-low midpoint: 200 * (high - low) / (high + low).
• Normalized Price RangePlaces the close inside the highest high and lowest low of the last period bars, scaled to a 0-1 position.
• Volatility StopVolatility Stop: a trailing long stop set multiplier ATRs below the highest close of the last period bars, and a short stop…