Volatility

Volatility is a measure of the extent to which the price of an asset fluctuates. It is often used to assess the risk of an investment and is a key factor in options pricing. For instance, a stock with higher volatility is more likely to experience price fluctuations than a stock with lower volatility.

Volatility can be measured using various methods, but the most common one is the standard deviation of returns. This measures how much the price of an asset has fluctuated over a specific period and is often used to predict future price movements.

Investors often use volatility as a risk measure when making investment decisions. Higher volatility indicates that an investment is more likely to lose money, but it also means that there is more potential for gain.