What is Volatility?
Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility is often measured as either the standard deviation or variance between returns from that same security or market index.
In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a “volatile” market. An asset’s volatility is a key factor when pricing options contracts.
- Volatility represents how large an asset’s prices swing around the mean price – it is a statistical measure of its dispersion of returns.
- There are several ways to measure volatility, including beta coefficients, option pricing models, and standard deviations of returns.
- Volatile assets are often considered riskier than less volatile assets because the price is expected to be less predictable.
- Volatility is an important variable for calculating options prices.
Real Time charts for some of the KEY Volatility Indexes ($VIX, VXX, SVXY, VXX, $GVZ, and $OVX) we follow are presented below. Please refresh the page to update the chart.