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A statistical measure of the dispersion of returns for a given security or market index.
Volatility is typically measured using standard deviation or variance of returns. Higher volatility means greater price swings and higher risk. Implied volatility is derived from options prices and reflects market expectations of future volatility. Historical volatility measures past price fluctuations. The VIX index, often called the "fear gauge," measures implied volatility of S&P 500 options and typically ranges from 10 to 20 in calm markets but can spike above 40 during crises. While volatility creates risk, it also creates opportunity for disciplined investors willing to buy during periods of elevated fear.