Volatility Definition

Volatility is a measure of the amount by which an asset’s price changes over time. It is often used as a measure of risk, as it can give investors an idea of how much their investment could lose or gain in value over a certain period of time.

There are two main types of volatility: historical and implied. Historical volatility is a measure of how much an asset’s price has fluctuated in the past. Implied volatility is a measure of how much an asset’s price is expected to fluctuate in the future.

Investors often use volatility to help them make decisions about where to invest their money. If they believe that an asset is going to become more volatile in the future, they may be less likely to invest in it. On the other hand, if they believe that an asset is going to become less volatile, they may be more likely to invest in it.