Implied Volatility (redirected from IV)

Implied volatility

The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option pricing model such as Black-Scholes.

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Implied Volatility

An estimation of the volatility of a stock as calculated by the price of an option on that stock. The factors used in determining a stock's implied volatility are the maturity date, exercise price, and riskless rate of return. One of the most common models used in estimating implied volatility is the Black-Scholes Option Pricing Model.

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Implied Volatility

What Does Implied Volatility Mean?

The estimated volatility of the price of a security.

Investopedia explains Implied Volatility

In general, implied volatility increases when the market is bearish and decreases when the market is bullish. This is due to the common belief that bearish markets are more risky than bullish markets. In addition to known factors such as market price, interest rate, expiration date, and strike price, implied volatility is used in calculating an option's premium. IV can be derived from a model such as the Black Scholes Model. Implied volatility sometimes is referred to as vols.

Related Terms:
• Beta
• Black Scholes Model
• Options
• Stock Option
• Volatility