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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.


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.


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 ?
In terms of theory, relatively little attention has been paid to the effect of business-cycle volatility on long-run economic growth.
There are also reasons to suspect a positive relationship between volatility and growth.
options exchange and creator of listed options, continues to set the bar for options and volatility trading through product innovation, trading technology and investor education.
Regression (2) advocates that the excess market return is positively related to expected volatility and negatively related to unexpected volatility.
In light of the potential for volatility to rise, in the short term we recommend considering stocks that offer decent dividend yields (cut-off dates are largely in April-June) and have shown belowaverage volatility over the past six months.
We know from talking to our global customer base that effectively managing risk between realised and implied volatility, correlation arbitrage, and hedging the volatility of their portfolios with currencies are vital.
Capital market volatility may be conceived of a degree to which asset prices tend to fluctuate.
Our graph shows that the volatility of GDP growth has increased during the current recession.
Second, rather than looking at the empirical long-run relationship between exports and a set of variables, we analyze the impact of volatility per se adopting a flexible lag approach.
Firstly, because implied volatilities are considered to be forward-looking measures of market volatility (Fleming et al.
The level of risk exposure that an investor takes is fundamentally tied to their exposure to portfolio volatility.
The Intraday Volatility Forecast is based on a proprietary mathematical model that uses historical futures data to forecast the direction and magnitude of volatility.