30 years: Financial markets trader
In this video, Abdulla provides an overview of volatility - a term that is associated with the magnitude of movements in price of an asset over time.
In this video, Abdulla provides an overview of volatility - a term that is associated with the magnitude of movements in price of an asset over time.
Volatility is an instrumental figure in financial markets. Its statistical definition and the four kinds of volatility are defined.
Key learning objectives:
Understand volatility
Define the four types of volatility
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We associate volatility with the magnitude of movements in the price, or percentage changes, of an asset over time. Assets with a high volatility have the potential to move a lot and low volatility, not so much.
The market convention is to define volatility as one standard deviation of annual returns measured as a percentage. For example, a fifteen percent volatility in very simplistic terms means about sixty eight percent of the time, that’s the one standard deviation bit, the return should be between plus and minus fifteen percent from its current level in a year.
There are a number of types of volatility you might have come across:
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