Volatility Scaling

Problem

Scale a return series to a target volatility using the realized volatility sqrt(sum(r^2)): each return becomes r * target_vol / realized_vol.

Return an empty list for empty returns; if realized volatility is zero, return a list of zeros of the same length.

Hint

Scaling preserves the signs and the shape of the return path.

case 1

in: [[0.01,-0.02,0.03],0.05]

expected: [0.013363062095621218,-0.026726124191242435,0.04008918628686366]

case 2

in: [[0,0],0.1]

expected: [0,0]

case 3

in: [[0.1],0.2]

expected: [0.20000000000000004]

case 4

in: [[],0.1]

expected: []

Starter codePython

def volatility_scaling(returns, target_vol):
    # Your code here
    pass

4 test cases · run your code against them in the editor