Volatility

Volatility is a measure of the uncertainty or risk associated with an asset or a financial market. It refers to the amount of fluctuation that the prices of an asset experience in a given period of time. Investors use this measure to assess the profit and loss potential of their investments, and to determine the price of financial instruments. It is important to mention that there are different types of volatility, such as implicit volatility and historical volatility, both of which are important to assess the risk associated with an asset or a market.

Definition:

In the context of financial markets, volatility refers to the measure of the fluctuation of an asset's prices over time. It is a measure of the uncertainty or risk associated with an asset or a market. Volatility can be measured in several ways, such as the standard deviation, the interquartile range, the coefficient of variation, among others. Volatility can be measured for a specific asset or for a market in general. Investors and traders use volatility to assess the risk of their investments and to determine the price of options and other derivative instruments. It is also used to measure the historical and expected performance of an asset. In general, assets with high volatility are considered riskier than assets with low volatility. It is important to mention that there is implied volatility and historical volatility, the first refers to the expected volatility in the future, while the second refers to the volatility measured in the past.