Historical Volatility
A statistical measure of how much an asset's price has actually fluctuated over a past period, commonly annualized, distinct from implied volatility.
Historical volatility statistically measures how much an asset's price has actually fluctuated over a specific past period, typically calculated from the standard deviation of its periodic returns and commonly annualized for comparability across different assets and timeframes.
This is a distinct concept from implied volatility, which reflects the options market's current expectation of future volatility rather than a measurement of what already happened — see Kaavon's "Implied Volatility" glossary definition. "Historical volatility" and "realized volatility" (see Kaavon's "Realized Volatility" glossary definition) describe the same backward-looking calculation and are generally used interchangeably in practice. See Kaavon's dedicated Historical Volatility article for the full calculation, including the crypto-specific annualization convention.
Examples
- An asset with a 24-hour, 365-day trading calendar uses a different annualization factor for historical volatility than a traditional market with scheduled closures.
- Historical volatility measures what already happened; implied volatility reflects the market's current expectation of what might happen next — the two can and do diverge.