Volatility

Volatility
Measurement of the risk on the basis of fund performance’s standard deviation over a period of three years. The scale is from 1 to 9, with a higher rating indicating higher risk. It is the standard deviation of changes of the asset price’s logarithm, and is expressed as an annual rate.

It is also a variable appearing in formulas of option pricing. Here, it indicates how volatile the underlying asset’s return is from the present till the expiration date. For a standard deviation of up to 7.99, the corresponding rating is 1. For standard deviations of 29 and upwards, the corresponding rating is 9.

Random Finance Terms for the Letter V