volatility
how much and how quickly a financial price goes up and down
The degree to which a price, market, currency, or investment changes quickly and unpredictably, often used as a measure of risk.
a state in which things can change suddenly and are hard to predict
The quality of being likely to change suddenly and unpredictably, especially in a situation, system, or environment.
a tendency for someone's feelings or mood to change very suddenly
A tendency to change mood suddenly or to become angry, upset, or excited very quickly.
how easily a liquid or solid changes into a gas
The tendency of a substance to evaporate or change into vapor easily.
- Base: volatility
- Plural: volatilities, volatility
historical volatility
1measured past price movement
a measure of how much a price moved in the past
- The analyst compared the stock's historical volatility with its current implied volatility.
- Bitcoin has had much higher historical volatility than most major currencies.
- The report measured historical volatility over a 30-day period.
- Historical volatility shows past price changes.
- The stock's historical volatility was high last year.
implied volatility
1expected future market movement
a finance measure showing how much traders expect a price to move in the future
- The option became more expensive as implied volatility rose.
- Traders often watch implied volatility before major earnings announcements.
- A fall in implied volatility can reduce the value of an option even if the stock price barely changes.
- High implied volatility means traders expect bigger price moves.
- The investor checked the option's implied volatility.
volatility arbitrage
1trading volatility mispricing
a trading strategy that tries to make money when volatility is priced incorrectly
- The hedge fund uses volatility arbitrage to exploit pricing differences in options markets.
- Volatility arbitrage can lose money when market conditions change suddenly.
- The strategy depends on accurate estimates of future volatility.
- Volatility arbitrage is an advanced trading strategy.
- It tries to profit from wrong volatility prices.
volatility index
1index of expected volatility
a market number that shows how much investors expect prices to move
- The volatility index jumped after investors reacted to the surprise announcement.
- Many analysts treat the VIX volatility index as a gauge of market fear.
- Funds that track a volatility index can be risky for long-term investors.
- The volatility index rose during the crisis.
- Investors watched the volatility index closely.
volatility smile
1curved options volatility pattern
a graph pattern in options markets where expected volatility is higher at both low and high strike prices
- The trader studied the volatility smile before pricing the exotic option.
- After the market shock, the volatility smile became much steeper.
- A volatility smile shows that options with different strike prices can have different implied volatilities.
- The volatility smile is used in options trading.
- Its name comes from the shape of the curve.