Computing Intraday Volatility using mid price

External question — Quantitative Finance Stack Exchange Author: Elkhanba Original post: https://quant.stackexchange.com/questions/83738 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I’m working with an order book that contains the 10 best bid and 10 best ask levels. A common approach for estimating volatility is to use the mid-price, typically computed from the first best bid and first best ask. However, this method only considers the top level of the book and neglects the information provided by the other levels, which may be relevant—especially if orders at those levels are executed. Given this context, are there alternative methods for computing volatility that still rely on the mid-price concept but also incorporate the information from deeper levels of the order book?

External answer — Quantitative Finance Stack Exchange Author: TheBroSnail Original post: https://quant.stackexchange.com/a/85289 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. Maybe use weighted mid price based on LOB imbalance? I think they call this Micro Price.