Volatility
Volatility refers to the degree of variation in the price of an asset over time.
Volatility is a key measure of the risk associated with an investment, reflecting the frequency and magnitude of price movements. High volatility can lead to significant drawdowns, while low volatility is associated with more stable returns. Investors and fund managers assess volatility when constructing portfolios, using risk management techniques to hedge against potential market fluctuations. Volatility can be quantified through various metrics like the Sharpe ratio and value at risk (VaR).
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