Historical Volatility - HV

AAA

DEFINITION of 'Historical Volatility - HV'

The realized volatility of a financial instrument over a given time period. Generally, this measure is calculated by determining the average deviation from the average price of a financial instrument in the given time period. Standard deviation is the most common but not the only way to calculate historical volatility.

Also known as "statistical volatility."

BREAKING DOWN 'Historical Volatility - HV'

This measure is frequently compared with implied volatility to determine if options prices are over- or undervalued. Historical volatility is also used in all types of risk valuations. Stocks with a high historical volatility usually require a higher risk tolerance.

RELATED TERMS
  1. Implied Volatility - IV

    The estimated volatility of a security's price.
  2. Variance

    The spread between numbers in a data set, measuring Variance ...
  3. Volatility Arbitrage

    Trading strategies that attempt to exploit differences between ...
  4. Historical Returns

    The past performance of a security or index. Analysts review ...
  5. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  6. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
Related Articles
  1. Options & Futures

    An Introduction To Value at Risk (VAR)

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  2. Markets

    Using Historical Volatility To Gauge Future Risk

    Use these calculations to uncover the risk involved in your investments.
  3. Markets

    The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  4. Options & Futures

    Options Risk Graphs: Visualizing Profit Potential

    With a single diagram, you can see how price, time and volatility affect potential gains.
  5. Options & Futures

    The ABCs Of Option Volatility

    The mystery of options pricing can often be explained by a look at implied volatility (IV).
  6. Mutual Funds & ETFs

    ETF Analysis: First Trust Dow Jones Global Sel Div

    Find out about the First Trust Dow Jones Global Select Dividend Index Fund, and learn detailed information about characteristics and suitability of the fund.
  7. Term

    What are Mutually Exclusive Events?

    In statistics, mutually exclusive situations involve the occurrence of one event that does not influence or cause another event.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares DB Commodity Tracking

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  9. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  10. Options & Futures

    Use Options to Hedge Against Iron Ore Downslide

    Using iron ore options is a way to take advantage of a current downslide in iron ore prices, whether for producers or traders.
RELATED FAQS
  1. How does implied volatility impact the pricing of options?

    Implied volatility is an important aspect of the time value premium of an option. As implied volatility increases, call and ... Read Full Answer >>
  2. How is implied volatility used in the Black-Scholes formula?

    Implied volatility is derived from the Black-Scholes formula and is an important element for how the value of options are ... Read Full Answer >>
  3. Can delta be used to calculate price volatility of an option?

    The delta of an option is a component of the Black-Scholes option pricing formula, which provides the implied volatility ... Read Full Answer >>
  4. What is an option's implied volatility and how is it calculated?

    Implied volatility is a parameter part of an option pricing model, such as the Black-Scholes model, that gives the market ... Read Full Answer >>
  5. How can you calculate volatility in Excel?

    Though there are several ways to measure the volatility of a given security, analysts typically look to the historical volatility. ... Read Full Answer >>
  6. What is the best measure of a given stock's volatility?

    When selecting a security for investment, traders look at its historical volatility to help determine the relative risk of ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!