In finance, volatility refers to the degree of variation in the price of a security, such as a stock, bond, or commodity, over a period of time. Volatility is often measured by calculating the standard deviation of the security’s returns or by using volatility indexes such as the VIX (CBOE Volatility Index) for stock markets.
High volatility means that the price of a security can fluctuate rapidly and by large amounts in a short period of time. Low volatility means that the price of a security does not fluctuate as much. Volatility can be affected by a variety of factors, such as economic conditions, government policies, and company-specific news.
Volatility can be used as a tool for traders, investors, and analysts to measure the risk of a security, to identify trends and patterns in the market, and to make buy and sell decisions. High volatility can indicate a high-risk investment and low volatility can indicate a low-risk investment.
It’s important to note that volatility can be affected by liquidity, and that securities with low trading volume can be more volatile than securities with high trading volume. Additionally, volatility can be affected by market conditions, news events, and other factors.