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Volatility

Volatility		The magnitude of price (or yield) changes over a predefined period of time. The amount by which an underlying instrument fluctuates in a given period of time. Also, the gross price movement over a specified period of time given a minimum value unit.
Additional comments: Options often increase in price when there is a rise in volatility even if the price of the underlying doesn't move anywhere. Volatility is a primary determinant in the valuation of options. There are two main types of volatility: historical and implied.

Related Terms
		Historic Volatility Calculated by using the standard deviation of underlying asset price changes from close-to-close of trading going back 21 to 23 days. A ... Implied Volatility The volatility computed using the actual market prices of an option contract and one of a number of pricing models. ... Vega The sensitivity of an option price to volatility. Typically, options increase in value during periods of high volatility. ...

 

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