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Volatility

 
(′väl·ə′til·əd·ē)

(thermodynamics) The quality of having a low boiling point or subliming temperature at ordinary pressure or, equivalently, of having a high vapor pressure at ordinary temperatures.


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characteristic of a security, commodity, or market to rise or fall sharply in price within a short-term period. Also called variability. A measure of the relative volatility of a stock to the overall market is its beta.
See also risk; volatile.

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1. A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.

2. A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used.

Investopedia Says:
In other words, volatility refers to the amount of uncertainty or risk about the size of changes in a security's value. A higher volatility means that a security's value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security's value does not fluctuate dramatically, but changes in value at a steady pace over a period of time.

One measure of the relative volatility of a particular stock to the market is its beta. A beta approximates the overall volatility of a security's returns against the returns of a relevant benchmark (usually the S&P 500 is used). For example, a stock with a beta value of 1.1 has historically moved 110% for every 100% move in the benchmark, based on price level.  Conversely, a stock with a beta of .9 has historically moved 90% for every 100% move in the underlying index.

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The degree of evaporation or vapor pressure.

 
 
Related topics:
relative volatility (chemistry)
Implied Volatility (in banking)
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McGraw-Hill Science & Technology Dictionary. McGraw-Hill Dictionary of Scientific and Technical Terms. Copyright © 2003, 1994, 1989, 1984, 1978, 1976, 1974 by McGraw-Hill Companies, Inc. All rights reserved.  Read more
Barron's Finance & Investment Dictionary. Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.  Read more
Investopedia Financial Dictionary. Copyright ©2010, Investopedia.com - Owned and Operated by Investopedia US, A Division of ValueClick, Inc. All rights reserved.  Read more
Wiley Dictionary of Flavors. Copyright © 2008 by Wiley-Blackwell. Wiley and the Wiley logo are registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries. Used here by license.  Read more

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