Equities
Volatility
Volatility captures the size of price swings over time. High volatility means large, rapid moves in both directions, while low volatility means calmer, steadier prices. It is often measured using standard deviation of returns.
Markets track expected volatility through indexes like the VIX, sometimes called the fear gauge, which rises when investors anticipate turbulence. Spikes in volatility usually coincide with risk-off selloffs.
While volatility is often equated with risk, it also creates opportunity. It is the raw material of options pricing and a key variable that traders and long-term investors alike must account for.
Example
During a market panic, the VIX volatility index can double in days as investors brace for sharp swings.
Volatility — FAQ
What is Volatility?
Volatility measures how much and how quickly an asset's price fluctuates, serving as a common proxy for risk in financial markets.
Can you give an example of Volatility?
During a market panic, the VIX volatility index can double in days as investors brace for sharp swings.
Understanding creates conviction.
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