Market volatility - Financial definition
Concise definition of the term market volatility
Market volatility refers to the degree of variation in the price of a financial instrument over time, often measured by the standard deviation or variance of returns.
Comprehensive definition of the term market volatility
Market volatility indicates the uncertainty or risk associated with the size of changes in a financial instrument's value, reflecting market sentiment and investor behavior. High volatility often coincides with periods of market turbulence or economic uncertainty, while low volatility suggests stability.
Practical examples include the VIX, also known as the "fear gauge," which measures the market's expectation of volatility based on S&P 500 index options. Investors and traders use various strategies to manage volatility, such as diversification, hedging, and the use of derivatives.