What parameters are used to calculate the standard deviation in order to equalize the contracts for volatility?
A.One standard deviation of corn price movement over time vs. One standard deviation of soybeans movement over time will give rise to a ratio of corn volatility to soybean volatility. Not corn price to corn price. That same ratio measured in corn price volatility to soybean price volatility in standard deviation units will give rise to the volatility ratio of the product values. This would be the “volatility” reading that is reported in the contract sizing recommendations on our website. The corn price to soybean price example is simply price valuations over time for the respective products from day-to-day, and is based solely on price.
