In [[finance]], '''volatility''' is a [[measure]] for variation of price of a financial instrument over [[time]]. Historic volatility is derived from time [[series]] of past market prices. An [http://en.wikipedia.org/wiki/Implied_volatility implied volatility] is derived from the market price of a market traded derivative (in particular an option). The symbol σ is used for volatility, and corresponds to [http://en.wikipedia.org/wiki/Standard_deviation standard deviation], which should not be [[confused]] with the similarly named variance, which is instead the square, σ2. Much [[research]] has been devoted to [[modeling]] and [[forecasting]] the volatility of financial returns, and yet few [[theoretical]] models explain how volatility comes to exist in the first place. | In [[finance]], '''volatility''' is a [[measure]] for variation of price of a financial instrument over [[time]]. Historic volatility is derived from time [[series]] of past market prices. An [http://en.wikipedia.org/wiki/Implied_volatility implied volatility] is derived from the market price of a market traded derivative (in particular an option). The symbol σ is used for volatility, and corresponds to [http://en.wikipedia.org/wiki/Standard_deviation standard deviation], which should not be [[confused]] with the similarly named variance, which is instead the square, σ2. Much [[research]] has been devoted to [[modeling]] and [[forecasting]] the volatility of financial returns, and yet few [[theoretical]] models explain how volatility comes to exist in the first place. |