Historical Volatility

Volatility refers to an asset's degree of unpredictable price change over a specified period of time. The more volatile an asset, the more difficult it is to predict where its price might be on a future date and the greater the risk associated with the asset. Here we describe the concept of volatility as a measure of dispersion. We explain how to estimate simple historical volatility using variance and standard deviation. The exponentially weighted moving average (EWMA) model is also discussed.