What is volatility?
Volatility is a statistical measure of the amount an asset’s price changes during a given period of time. It has become a popular way of assessing how risky an asset is – the higher the level of volatility, the more risk is associated with the asset.
Volatile markets are characterised by extremely fast-paced price changes and high trading volume, which is seen as increasing the likelihood that the market will make major, unforeseen price movements. On the other hand, markets that exhibit lower volatility tend to remain stable, and have less-dramatic price fluctuations.
Volatility is often measured using standard deviation, or by looking at the variation between the asset’s price movements and the movements of its underlying index.
