Volatility


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Volatility

A measure of risk based on the standard deviation of the asset return. Volatility is a variable that appears in option pricing formulas, where it denotes the volatility of the underlying asset return from now to the expiration of the option. There are volatility indexes. Such as a scale of 1-9; a higher rating means higher risk.

Volatility

A measure of a security's stability. It is calculated as the standard deviation from a certain continuously compounded return over a given period of time. It is an important measure in quantifying risk; for example, a security with a volatility of 50% is considered very high risk because it has the potential to increase or decrease up to half its value. Volatility may influence the type of investments one makes: one may directly invest in non-volatile securities, such as a certificate of deposit, but highly volatile securities lend themselves more to short selling and other forms of hedging.

Volatility.

The term volatility indicates how much and how quickly the value of an investment, market, or market sector changes.

For example, because the stock prices of small, newer companies tend to rise and fall more sharply over short periods of time than stock of established, blue-chip companies, small caps are described as more volatile.

The volatility of a stock relative to the overall market is known as its beta, and the volatility triggered by internal factors, regardless of the market, is known as a stock's alpha.

References in periodicals archive ?
The term structure of volatility describes how implied volatility changes with the term of the option.
Li and Hong (2011) also suggest a range-based autoregressive volatility model inspired on the GARCH and EGARCH approaches.
Singer believes there are several conditions that have driven volatility to artificially low levels.
That depends if one is talking about historical volatility or future expected volatility (Future expected volatility is known as implied volatility in the finance industry).
This excessive volatility at the short end of the yield curve not only complicates the monetary policy implementation process but may also lead to volatility in other important macroeconomic variables in the economy.
This paper explores the possibility that economic freedom is the missing link in the relationship between macroeconomic volatility and economic growth.
Similar to CBO (2008) and Sabelhaus and Song (2010), this research finds that unconditional individual income volatility fell in the mid-1980s, but remained relatively stable through the late 1990s and early 2000s.
The combination of rising volatility and interest rates can have an adverse impact on equity prices, highlighting the need for tailored risk management solutions.
Third, despite oil prices remaining at historically high levels during 2011-13, price volatility dropped to record lows.
e], is predicted using the generalized autoregres-sive conditional heteroskedasticity (GARCH) model of Bollerslev [1986], and the unexpected volatility is given by [[sigma].
In the meantime, we prefer to focus on Russia's relative volatility: in the competition for capital, we believe that despite the alow' volatility reading globally over the past 6M or so, the Russian market has missed out on fund flows in part due to its high volatility relative to other EMs (Figure 2).
Monies in invested in managed volatility funds totaled $129 billion as of September 2012, new research shows.