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Volatility

vol-uh-TIL-uh-tee /ˌvɒləˈtɪləti/

nounC1GRETOEFLIELTS

formalacademic

The liability to change rapidly and unpredictably, especially for the worse.

In finance, it measures the degree of variation of a trading price series over time. High volatility means prices can change dramatically in a short period.

The story behind the word. The word 'volatility' comes from the Latin 'volatilis,' meaning 'flying, fleeting,' which itself comes from 'volare,' meaning 'to fly.' Think of something that can 'fly away' or change its position very quickly and unpredictably. This perfectly describes market prices or currency values that can swing wildly in short periods.

Word relationships

instability: More general, refers to a lack of stability, not necessarily rapid change.
unpredictability: Focuses on the inability to foresee outcomes, rather than the speed of change.

stability: The state of being stable and unchanging.
steadiness: Consistency and lack of rapid change.

Commonly confused with

Risk: Volatility is a measure of risk (specifically, price risk), but not all risks are about price fluctuations.

Word family

volatile (adjective): liable to change rapidly and unpredictably, especially for the worse.

Collocations

market volatility
currency volatility
high volatility
low volatility
price volatility

Example sentences

"Investors are often wary of high volatility in the stock market, as it indicates greater risk." Analyzing financial markets.
"The political instability in the region led to extreme volatility in the local currency's exchange rate." Discussing currency risks.

Memory hook

VOLATILITY is like a 'VOLCANO' that can erupt unpredictably, or a 'VOLLEYBALL' that flies around quickly. It's about rapid, unpredictable changes. Rapid change

When not to use

Do not use 'volatility' for a single, sudden change; it implies a pattern of rapid, often unpredictable, movement.

Fun facts

In chemistry, 'volatile' refers to substances that evaporate quickly at normal temperatures, like alcohol or gasoline, linking back to the 'flying' origin.