What is a Volatility Risk?
Volatility risks are understood to be the amount of threat to a given investment, based on conditions currently taking place in the market. This would include some indication that the value of an underlying security is about to enter into a period of fluctuation that will seriously impact performance of the investment. When deciding whether or not to buy a given option, an investor will normally wish to be made aware of the amount of volatility risk currently associated with the investment. One of the easiest ways to understand the projection of volatility risk is to examine the risk associated with currency trading. In terms of a volatility risk, the holder of an option would want to understand the nature of the underlying securities that form the basis for the current exchange rate applied to the currency. At the same time, the option holder will want to understand any factors that appear to be changing, and could possibly adversely impact the rate of exchange currently applied to th
