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Volatility definition

A term with a broad meaning to some, and a very specific meaning to others.

Beginner

Volatility is a general term referring to the variability or dispersion of a measured variable like return. While there are many volatility measures, many associate the term first with standard deviation. Other measures include: beta, value at risk and semi-deviation. In Finance, all other things equal, lower volatility is preferred over higher volatility.

Synonyms: variability, dispersion, standard deviation


Other Original Content

Quiz

Click box for answer.

Several academic studies on volatility indicate that positive autocorrelation exists. | True or False?

True. This means that volatility tends to cluster.

In a Sentence

Jim:  We should always clarify which measure we're using when we use the term volatility .
Kay:  Agreed. In the trading world, the term normally refers to options volatility.

Video

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Keywords:
variance
variability
dispersion
risk
investment
Finance
beta
stocks
VAR
investment
modeling
distribution
semi-deviation
financial modeling