in the securities markets, volatility is often associated with big swings in either direction. for example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a "volatile" market. an asset's volatility is a key factor when pricing options contracts. in statistical terms, volatility is the standard deviation of a market or security’s annualised returns over a given period - essentially the rate at which its price increases or decreases. historical volatility is calculated using a series of past market prices, while implied volatility looks at expected future volatility, using the market price of a market-traded derivative like an option.