Volatility describes the degree to which the value of a security changes over time. High volatility means that the value changes dramatically, usually due to great market uncertainty. Traders thrive on market volatility because it presents opportunities to earn a profit. Low volatility means values change minimally, such as when all news has been priced into a market. Professional investors tend to benefit from low volatility because they are better able to lock in stable returns. Financial markets distinguish between historical volatility and implied volatility. Historical volatility is a measure of volatility based on past price or yield behaviour, while implied volatility is an estimation of future behaviour, implied by the price of an option.

See also: VIX