Investor Glossary-volatilityInvestor Glossary-volatilityInvestor Glossary-volatilityInvestor Glossary-volatilityInsightful stock market charts - Click here
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


The HTML to link to this page

In finance, volatility is a statistical measure of the tendency of a security's price to change over time. Volatility is defined as the standard deviation of the return over time T. (For technical reasons, volatility is usually computed based on log return rather than return.) Volatility must be stated for a specific period of time, such as a day or a year. Implied volatility is the volatility suggested for the price of an underlying asset based on the price of an option on that underlying. Implied volatility is obtained by solving an option pricing formula such as Black-Scholes for the volatility variable using the current option price. Ordinarily, an option pricing model is used to price an option, using historical volatility. Thus a difference between implied volatility and historical volatility suggests that market participants believe a security's performance will be different from past performance.

Rate this volatility definition...

Learn about investing with the Investor Glossary Term of the Day

Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.

Popular Terms: APR, required rate of return, in escrow, per diem, stock split, cancelled check, labor relations, liquidity ratio, inflation, 401a, limit order, risk management, Key Rate Duration, retained earnings, FICO score, quality assurance, 144a, real GDP, command economy, dividends payable, deferred revenue, class C shares, stock market close, deferred tax, balance sheet, reverse mortgage, phantom income, ex-dividend, option premium, LIBOR, annual return, debt service coverage, open position, 1035 exchange, current ratio, EBITDA, implied volatility, average price per share, wholly-owned subsidiary, Zero Cost Collar, irrevocable trust, ex-dividend date, FTSE, diluted share, covered put, minority interest, VIX, 1031 exchange, margin rate

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use