Business and Personal Finance Dictionary

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• VOLATILITY (HISTORICAL)
  
  This describes the fluctuations in the price of a stock or other type of security. If the price of a stock is capable of large swings, the stock has a high volatility. The pricing of options contracts depends in part on volatility. A stock with high volatility, for example, commands higher prices in the options market than one with low volatility. Volatility may be gauged by several measures, one of which involves calculating a security's standard deviation. Stock investors sometimes prefer to measure a stock's volatility versus that of an index, such as the Standard & Poor's 500 Index. This is known as a stock's beta. A beta of 1.2 implies a stock that is 20% more volatile than the S&P 500. When the S&P rises 10%, the stock is expected to rise 12%.
  
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