Volatility Risk

Volatility risk - Wikipedia, the free encyclopedia


Volatility risk
From Wikipedia, the free encyclopedia. Volatility risk in financial markets is the likelihood of fluctuations in the exchange rate of currencies. Therefore, it is a probability measure of the threat that an exchange rate movement poses to an investor's portfolio in a foreign currency. The volatility of the exchange rate is measured as standard deviation over a dataset of exchange rate movements. A far more sophisticated extension of this model is the Value at Risk method, which helps to determine the actual risk exposure to a portfolio of several currencies.

Consequences of currency volatility
Reduces volume of international trade Reduces long term capital flows Increases speculation Increases resources absorbed in risk management Economic policy making becomes difficult

See also
Exchange rate Standard deviation Risk management Value at Risk method Market risk Retrieved from "http://en.wikipedia.org/wiki/Volatility_risk" Categories: Foreign exchange market | Risk | Economics and finance stubs

This page was last modified 03:31, 13 August 2005. All text is available under the terms of the GNU Free Documentation License (see Copyrights for details).

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