Volatility measures how much the price of a security, derivative, or index fluctuates.
 | | Term of the Day | Words to Know | | |  | | Volatility | Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. Volatility is often measured as either the standard deviation or variance between returns from that same security or market index.
In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a "volatile" market. An asset's volatility is a key factor when pricing options contracts. | | Read More » | | Dispersion | | Dispersion is a statistical term that describes the size of the range of values expected for a particular variable. | | Read More » | | | Standard Deviation | | The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance. | | Read More » | | | Variance | | Variance is a measurement of the spread between numbers in a data set. Investors use the variance equation to evaluate a portfolio's asset allocation. | | Read More » | | | CBOE Volatility Index | | The CBOE Volatility Index, or VIX, is an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 3-day volatility. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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