Homonym: Volatility (Instability)
Volatility refers to the degree of variation in the price of a financial asset over time. It indicates how much the price of an asset, such as a stock or a commodity, fluctuates. High volatility means that the asset's price can change dramatically in a short period, while low volatility indicates more stable prices. Investors often use volatility to assess risk; assets with higher volatility are generally considered riskier.
In financial markets, volatility can be influenced by various factors, including economic data, market sentiment, and geopolitical events. Traders and investors monitor volatility to make informed decisions about buying or selling assets. Tools like the VIX index measure market volatility and help gauge investor expectations for future price movements.