What Is Volatility? Meaning & Example
Definition
Volatility measures how much and how quickly prices move. Higher volatility means bigger swings, which bring both more opportunity and more risk.
Related terms
Beta measures how much an investment tends to move relative to the overall market. A beta above 1 means it usually swings more than the market, below 1 means less.
Implied VolatilityImplied volatility is the market's expectation of future price swings, derived from option prices. Higher implied volatility makes options more expensive.
DrawdownA drawdown is the decline from a portfolio's or asset's peak value to a later low. Maximum drawdown shows the worst peak-to-trough drop over a period.
What is Volatility?
Volatility measures how much and how quickly prices move. Higher volatility means bigger swings, which bring both more opportunity and more risk.
Can you give an example of Volatility?
An asset that often moves 5% in a day is far more volatile than one that usually moves 0.5%.