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What is Volatility?

July 6, 2021 By James Rabinovich Leave a Comment

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What is Volatility?

Volatility come in two types, namely:

1. Historic volatility: this is the yearly standard deviation of a product’s price. The more it goes up and down in price, the higher the measure of volatility becomes.

2. Implied volatility: since volatility is a measure of risk, it is used to input models to price options. Therefore if the option pricing formula is reworked, you can calculate the volatility from an option’s market price.

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James Rabinovich
James Rabinovich
James Rabinovich
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