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Asymmetric Volatility Phenomenon - AVP

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Definition of 'Asymmetric Volatility Phenomenon - AVP'

The asymmetric volatility phenomenon (sometimes known as AVP) is a market dynamic that shows that there are higher market volatility levels in market downswings than in market upswings. Factors that cause this phenomenon have been attributed to several possible sources, such as the effects of leverage in the markets, volatility feedback and psychological investment factors related to the perceived risk/reward balance at different market levels. 
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Investopedia explains 'Asymmetric Volatility Phenomenon - AVP'

The existence of asymmetric volatility has been widely studied and confirmed, although no consensus exists as to the price drivers of the phenomenon. Its presence plays an important role in risk management and hedging strategies as well as options pricing. One of the difficult factors in identifying the causes of asymmetric volatility is separating out market-wide (systematic) factors from stock-specific (idiosyncratic) factors.

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    Systematic Risk

    The risk inherent to the entire market or entire market segment. Also known as "un-diversifiable risk" or "market risk."
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    Risk that affects a very small number of assets, and can be almost eliminated with diversification. Similar to unsystematic risk.
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