Updated from 3/8/2007 at 2:15 p.m. EST"Volatility" is a term that is increasingly interjected into financial market commentary by the press and professionals. In fact, Bloomberg Radio has a daily "Volatility Report." While the term is being thrown around with a seemingly high degree of expertise, I find that the concept is not well understood by most commentators and the average investor. This module of TheStreet University will cover the four main types of volatility measures:
- historical volatility;
- implied volatility;
- the volatility index; and
- intraday volatility.
Click here for a larger view of the historical volatility chart.
Click here for a larger view of the implied volatility chart.
Click here to view the volatility indices chart.
Click here for a larger view the intraday volatility chart.
- historical volatility -- the movement of an asset or asset class relative to itself;
- implied volatility -- volatility that is embedded in an option price;
- volatility index -- a weighted average of implied volatilities for options on a particular index;
- intraday volatility -- the price movements in a stock or index on or during a given trading day.