volatility

Examples of volatility in the following topics:

• Historical Returns: Market Variability and Volatility

  • Markets and securities may follow general trends, but exogenous factors (such as macroeconomic changes) cause variability and volatility.
  • These types of interlinkages are a cause of the overall market variability and volatility.
  • Furthermore, market variability and volatility can be the cause of what John Maynard Keynes called animal spirits.

• Overview of How to Assess Stand-Alone Risk

  • Recall that Beta is a number describing the correlated volatility of an asset or investment in relation to the volatility of the market as a whole.
  • In terms of finance, the coefficient of variation allows investors to determine how much volatility (risk) they are assuming in relation to the amount of expected return from an investment.
  • Volatility is measured in the form of the investment's standard deviation from the mean return, thus the coefficient of variation is this standard deviation divided by expected return.
  • The coefficient of variation, an example of which is plotted in this graph, can be used to measure the ratio of volatility to expected return.

• Beta Coefficient for Portfolios

  • A portfolio's Beta is the volatility correlated to an underlying index.
  • A portfolio's Beta is the volatility correlated to an underlying index.
  • Beta is a normalized variable, which means that it is a ratio of two variances, so you have to compare the volatility of returns to the benchmark volatility.

• Clostridial and Propionic Acid Fermentation

  • Acetogenesis is a biological reaction wherein volatile fatty acids are converted into acetic acid, carbon dioxide, and hydrogen.
  • Acidogenesis is a biological reaction wherein simple monomers are converted into volatile fatty acids.
  • Acetogenes is a biological reaction wherein volatile fatty acids are converted into acetic acid, carbon dioxide, and hydrogen .
  • The hydrolyzed compounds are fermented into volatile fatty acids (acetate, propionate, butyrate, and lactate), neutral compounds (ethanol, methanol), ammonia, hydrogen and carbon dioxide.

• Announcements, News, and Returns

  • There are times when the markets are relatively stable and those when it is relatively volatile.
  • The correlation of 0.769 suggests that the volatility of the stock market in one month is very highly correlated to that in the previous month.
  • Volatility is measured as the standard deviation of S&P 500 one-day returns over a month's period.

• Advantages of Bonds

  • Bonds have some advantages over stocks, including relatively low volatility, high liquidity, legal protection, and a variety of term structures.
  • The volatility of bonds (especially short and medium dated bonds) is lower than that of equities (stocks).
  • In addition, bonds do suffer from less day-to-day volatility than stocks, and the interest payments of bonds are sometimes higher than the general level of dividend payments.

• Vapor Pressure of Nonelectrolyte Solutions

  • A substance that evaporates quickly has high vapor pressure and is referred to as a volatile substance.
  • The vapor pressure of a solvent is lowered by the addition of a non-volatile solute to form a solution.
  • By definition, a non-volatile substance does not evaporate.

• Risk Adjusting for the Time Horizon

  • A longer time horizon usually requires a higher return, due to increased price volatility and uncertainty relating to possible outcomes.
  • A longer time horizon will generally require a higher return, due to an increased risk in price volatility and increased uncertainty relating to possible outcomes.

• Black-Scholes Formula

  • The Black-Scholes formula explains the relationship between the price of the stock, volatility, the price of the financial derivative (such as an option), and time .
  • reversible, as the model's original output, price, can be used as an input and one of the other variables solved for; the implied volatility calculated in this way is often used to quote option prices
  • The Black-Scholes formula where S is the stock price, C is the price of a European call option, K is the strike price of the option, r is the annualized risk-free interest rate, sigma is the volatility of the stock's returns, and t is time in years (now=0, expiry=T).

• Defining Options and Their Valuation

  • An estimate of the future volatility of the underlying security's price over the life of the option.
  • More advanced models can require additional factors, such as an estimate of how volatility changes over time and for various underlying price levels, or the dynamics of stochastic interest rates.
  • The application of the model in actual options trading can be clumsy because of the assumptions of continuous (or no) dividend payment, constant volatility, and a constant interest rate.
  • Where: N is the cumulative distribution function of the standard normal distribution; T - t is the time to maturity; S is the spot price of the underlying asset; K is the strike price; r is the risk free rate; and omega is the volatility of returns of the underlying asset.
  • In this particular example, the strike price is set to unity, the risk-free rate is 0.04 and the volatility is 0.2.