127 The volatility The volatility of an asset is the standard deviation of the continuously compounded rate of return in 1 year As an approximation it is the standard deviation of the percentage change in the asset price in 1 year Options, Futures, and Other Derivatives, Sth Edition C 2002 by John C. Hull12.7 Options, Futures, and Other Derivatives, 5th Edition © 2002 by John C. Hull 7 The Volatility • The volatility of an asset is the standard deviation of the continuously compounded rate of return in 1 year • As an approximation it is the standard deviation of the percentage change in the asset price in 1 year