A measure of the amount of change in the daily price of a security over a specified period of time. Usually given as the standard deviation of the daily price changes of that security on an annual basis.
What is Volatility?
Volatility refers to the fluctuations in the price of a security or an asset over a given period of time. Volatility is often used as a measure of risk for an investment, as it represents how much the price of an asset can change over time. Higher volatility means that an asset’s price can change dramatically over a short period of time, while lower volatility means that the price changes are more stable and predictable.
Volatility can be expressed in several ways, such as the standard deviation of returns, the average true range, or the average daily range. It can be influenced by a variety of factors, including economic and political events, changes in market sentiment, and supply and demand dynamics. Investors who are risk-averse generally prefer investments with lower volatility, while those who are willing to take on more risk may seek investments with higher volatility in the hope of potentially earning higher returns.
