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Finance Dictionary and Glossary of Investment Terms
1. In general, volatility is a statistical measure of the tendency of a market or security to rise or fall sharply within a short period of time. Volatility is typically calculated by using variance or annualized standard deviation of the price or return. 2. Volatility is a variable that appears in option pricing formulas. In the option pricing formula, it denotes the extent to which the return of the underlying asset will fluctuate between now and the expiration of the option.