Historical Volatility

RECENT NEWS
The Economic Times  2 hrs ago  Comment 
Ultra-rich investors have emerged as counterparties to foreign investors in trades that could potentially backfire on them if volatility spikes from current highs.
Clusterstock  4 hrs ago  Comment 
The New York Stock Exchange is under attack. One of its biggest rivals, as well as electronic trading firms that do business on the exchange, are criticizing the way it handled recent swings in the market. At the heart of the matter is the...
Forbes  5 hrs ago  Comment 
"You know sometimes in life all you have is (messed up) and poisonous choices". Its a line from the movie, American Hustle, I edited in the event my children read this. Jennifer Lawrence's character Rosalyn Rosenfeld delivered the line flawlessly....
guardian.co.uk  6 hrs ago  Comment 
As Chinese authorities hunt for imaginary culprits, investors should get used to wild stock market rides Get used to the wild stock market rides. Tuesday’s action lacked the high drama of Monday last week - there was no slump in Chinese share...
Benzinga  8 hrs ago  Comment 
Rosengren also says hike cycle to be gradual and little economic difference on timing of rate. - reuters © 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Motley Fool  8 hrs ago  Comment 
Weak earnings? Check. Distribution cut? Check. Volatile Oil prices? Check. It’s no surprise to see that Memorial Production Partners LP was down big in August.
The Hindu Business Line  8 hrs ago  Comment 
Global volatility also hits FII sentiment
Mondo Visione  9 hrs ago  Comment 
Due to increased volatility and significant growth in the number of orders and transactions on the Derivatives Market, Moscow Exchange will extend the duration of the midday clearing session beginning tomorrow, 2 September. Currently the midday...
The Hindu Business Line  9 hrs ago  Comment 
It is all about spotting value buys, say analysts
MarketWatch  12 hrs ago  Comment 
The New York Stock Exchange on Tuesday invoked Rule 48, a measure designed to smooth the opening of the market amid potentially volatile conditions. The rule allows the exchange's designated market-makers to refrain from disseminating price...




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Volatility refers to the tendency of prices to change unexpectedly, usually as a response to new information or changes in demand for the investment. Volatility can be defined as an investment's tendency to move up and down in price over the latest n periods.

A security with high volatility has bigger fluctuations in price compared to a security with low volatility. The more quickly a price changes up and down, the more volatile it is. As such, volatility is often used as a measure of risk.

For example: A stock whose price went up 10% yesterday and went down 25% today is more volatile than a stock which increased 2% in both days.

Historical volatility is calculated by looking at past changes in stock price. The standard deviation of percentage changes in price is used to calculate observed volatility within the considered timeframe.

Historical Volatility, which looks at the past, is distinct from Implied volatility, which represents expectations about future fluctuations in price and is calculated by looking at the prices of options on the underlying investment.

Volatility is also different from Beta, which is a measure of how the stock price reacts to changes in a broad market index, such as the S&P 500.


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