Daily yield volatility is the standard deviation of the daily yield changes. The variance of daily yield change is obtained by dividing the sum of the squared deviations by the number of observations minus one. Therefore, we have:
Variance of daily yield change = 0.0100/(26 – 1) = 0.0004
Yield volatility = Standard deviation of daily yield change = (Variance of daily yield change)½ = (0.0004)½ = 0.0200 = 2%
