what is volatility 
volatility is a statistical measure of the dispersion of returns for a given security or market index it is often measured from either the standard deviation or variance between those returns in most cases the higher the volatility the riskier the security in the securities markets volatility is often associated with big price swings either up or down for example when the stock market rises and falls more than 1 over a sustained period of time it is called a volatile market an asset s volatility is a key factor when pricing options contracts understanding volatilityvolatility often refers to the amount of uncertainty or risk related to 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 move dramatically over a short time period in either direction a lower volatility means that a security s value does not fluctuate dramatically and tends to be steadier one way to measure an asset s variation is to quantify the daily returns percent move on a daily basis of the asset historical volatility is based on historical prices and represents the degree of variability in the returns of an asset 1 this number is without a unit and is expressed as a percentage 2while variance captures the dispersion of returns around the mean of an asset in general volatility is a measure of that variance bounded by a specific time period thus we can report daily weekly monthly or annualized volatility it is useful to think of volatility as the annualized standard deviation 