Volatility

There are two types of volatility:

  • Historical volatility is actual volatility based on volatility realised in past movements in the market.
  • Implied volatility is the volatility interpreted from the price of Options. So, the implied volatility is the expected spread of movement of an underlying asset’s price, predicted over the term of the Option, and derived from the known prices of Options and the other parameters used in the calculation of those prices.