Börsenlexikon: Volatility

A statistical measure of the dispersion of returns (yields) for a given security or market index. Volatility can be measured using either standard deviation or the deviation between gains from that security or market index. Generally, the higher the volatility, the riskier the underlying security.

In other words, volatility refers to the amount of uncertainty or risk regarding the magnitude of changes in the value of a security. Higher volatility means that the value of a security can potentially be stretched over a larger range of values. This means that the price of the security can change dramatically in either direction for a short period of time. Whereas a lower volatility would mean that the value of a security does not fluctuate drastically, but changes in value at a constant rate for a period of time.