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Higher volatility of returns after retirement may result in withdrawals having a larger permanent impact on the portfolio's value; Price volatility presents opportunities to anyone with inside information to buy assets cheaply and sell when overpriced; Volatility affects pricing of options, being a parameter of the Black–Scholes model.
Volatility is a statistical measure based on how much an asset’s price moves in either direction and is often used to measure the riskiness of an asset or security. ... and your portfolio could ...
Portfolio return is the proportion-weighted combination of the constituent assets' returns. Portfolio return volatility is a function of the correlations ρ ij of the component assets, for all asset pairs (i, j). The volatility gives insight into the risk which is associated with the investment.
It measures the returns of the portfolio, adjusted for the risk of the portfolio relative to that of some benchmark (e.g., the market). We can interpret the measure as the difference between the scaled excess return of our portfolio P and that of the market, where the scaled portfolio has the same volatility as the market.
Historical volatility (HV) is a statistical measure of a stock’s price fluctuations over a specific period in the past. It’s calculated using historical price data.
Volatility risk is the risk of an adverse change of price, due to changes in the volatility of a factor affecting that price. It usually applies to derivative instruments , and their portfolios, where the volatility of the underlying asset is a major influencer of option prices .
To measure the effect of changing positions on portfolio risk, individual VaRs are insufficient. Volatility measures the uncertainty in the return of an asset, taken in isolation. When this asset belongs to a portfolio, however, what matters is the contribution to portfolio risk.
A volatility exchange-traded fund (ETF) lets traders bet on an increase in the stock market’s volatility. It can be a highly profitable wager if the market suddenly becomes more volatile, for ...