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.
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 marketwide (systematic) factors from stockspecific (idiosyncratic) factors.

Systematic Risk
The risk inherent to the entire market or entire market segment. ... 
Idiosyncratic Risk
Risk that is specific to an asset or a small group of assets. ... 
Leverage
1. The use of various financial instruments or borrowed capital, ... 
Correlation
In the world of finance, a statistical measure of how two securities ... 
Risk/Reward Ratio
A ratio used by many investors to compare the expected returns ... 
Hedge
Making an investment to reduce the risk of adverse price movements ...

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