implied volatility

implied volatility
Volatility of a financial instrument that is imputed by subtracting all of the other factors thought to contribute to the price of an option. The amount remaining after those subtractions is attributed to volatility. Implied volatility is not the same as the actual volatility.
See realized volatility, volatility and variance swap. American Banker Glossary
The expected volatility in a stock's return derived from its option price, maturity date, exercise price, and riskless rate of return, using an option pricing model such as Black-Scholes option-pricing model . Bloomberg Financial Dictionary
See "volatility."
Associated solely with options, the market's perception as to future volatility can be implied by the input of the market price of an option into the theoretical option pricing model, along with the other known inputs, namely time to expiry, exercise price, underlying price and interest rates in order to find the unknown volatility. Dresdner Kleinwort Wasserstein financial glossary
A measurement of the market's expected price range of the underlying commodity futures based on the market-traded option premiums. Exchange Handbook Glossary
The value for volatility embedded in the market price of an option. The market price of the option is used to derive the level of volatility implied in it. This represents the markets best estimate of future volatility, and can be compared with historical volatility to determine whether this view has changed. LIFFE

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   The volatility implied in the price of an option. It is a measure of how much the market thinks prices will move given a known option price. It indicates the size, but not the direction, of the movement expected. Volatility is expressed as an annualized percentage.
   ► See also Volatility.

Financial and business terms. 2012.

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