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Glossary Term: HISTORICAL VOLATILITY

Definition(s) for HISTORICAL VOLATILITY:


1. ) refers to a measure of the actual volatility (a statistical measure of dispersion) observed in the marketplace.

2. ) No one can accurately predict the future but a knowledge of past behavior can be used as a guide to help make informed decisions of what is likely to happen next. With this idea in mind, Historical volatility measures the variance of the changes in a security over time. Traders generally tend to start looking at volatility over a long time, at least ten years. This allows identification of short-term deviations from normal activity. That being said, one should not overlook short-term volatility either. If a commodity has averaged 20% volatility over the last year but only 100ver the past thirty days, it might be wise to adjust the volatility estimates to accommodate the most recent data.



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