@railpath/finance-toolkit/dist/risk/calculateGarmanKlassVolatility.js

Production-ready finance library for portfolio construction, risk analytics, quantitative metrics, and ML-based regime detection

"use strict";
Object.defineProperty(exports, "__esModule", { value: true });
exports.calculateGarmanKlassVolatility = calculateGarmanKlassVolatility;
/**
 * Garman-Klass volatility estimator
 * Uses OHLC data, most efficient unbiased estimator
 *
 * Garman, M. B., & Klass, M. J. (1980). "On the Estimation of Security Price Volatilities
 * from Historical Data"
 */
function calculateGarmanKlassVolatility(openPrices, highPrices, lowPrices, closePrices) {
    const n = openPrices.length;
    if (n === 0) {
        throw new Error('Price arrays cannot be empty');
    }
    if (n !== highPrices.length || n !== lowPrices.length || n !== closePrices.length) {
        throw new Error('All price arrays must have equal length');
    }
    let sum = 0;
    for (let i = 0; i < n; i++) {
        // Validate prices
        if (openPrices[i] <= 0 || highPrices[i] <= 0 || lowPrices[i] <= 0 || closePrices[i] <= 0) {
            throw new Error('All prices must be positive');
        }
        if (highPrices[i] < lowPrices[i]) {
            throw new Error('High price must be greater than or equal to low price');
        }
        const hlRatio = Math.log(highPrices[i] / lowPrices[i]);
        const coRatio = Math.log(closePrices[i] / openPrices[i]);
        // Garman-Klass formula: 0.5 * (ln(H/L))² - (2*ln(2)-1) * (ln(C/O))²
        sum += 0.5 * Math.pow(hlRatio, 2) - (2 * Math.log(2) - 1) * Math.pow(coRatio, 2);
    }
    const variance = sum / n;
    // Handle negative variance (can happen with the formula)
    if (variance < 0) {
        return 0;
    }
    return Math.sqrt(variance);
}