Hedge Fund Glossary

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Volatility

degree of fluctuation in the price or return of a financial instrument or index over time. Historical Volatility is the “backward-looking” estimate of average fluctuation of prices around the average, similar to the standard deviation of a price or index level. Implied Volatility is the market’s “forward-looking” estimate of average fluctuation as reflected in the price of Options on an underlying share or index.

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