Volatility
A measure of the unceratinty or risk in the future price of an asset. Typically volatility is measured by the standard deviation or variance of returns on the asset. Also, volatility is a variable that appears in option pricing formulas. In the option pricing formula, it denotes the volatility of the underlying asset return from now to the expiration of the option. |
Similar financial terms
Volatility MatrixA table showing the variation of implied volatilities with strike price and time to maturity.
Volatility term structure
The volatility term structure is the variation of implied volatility with time to maturity.
Volatility swap
A volatility swap is a financial instrument where the realized volatility during an accrual period is exchanged for a fixed volatility. Both percentage volatilities are applied to a notional principal.
Volatility risk
The risk in the value of options portfolios due to the unpredictable changes in the volatility of the underlying asset.
Reward-to-volatility ratio
Ratio of excess return to portfolio standard deviation.
Volatility Quote Trading
Refers to the quoting of bids and offers on option contracts in terms of their implied volatilities rather than as prices.
