Concepts: Volatility Modeling

Volatility modeling is a method used to measure and predict how much the price of an asset, like stocks or currencies, fluctuates over time. By analyzing past price movements, these models help investors understand the potential risk or variability in returns. This insight assists in making informed decisions, managing risk, and pricing financial instruments accurately. Essentially, volatility models quantify the uncertainty or stability of an asset's value, enabling better planning and more effective strategies in financial markets.