For any fund that evolves randomly with time, the square of volatility is the variance of the sum of infinitely many. A measure of risk based on the standard deviation of the asset return. Volatility is a variable that appears in option pricing formulas, where it denotes the volatility. Volatility definition, evaporating rapidly; passing off readily in the form of vapor: Acetone is a volatile solvent. See more. Categories Glossary Economy Equity Insurance Budget Marketing Mutual Fund Space Technology Testing Human Burghof bietigheim Finance Real Estate Security Sports Commodity Software Development Analytics HR Entertainment Retail Shipping Astronomy Transportation Education Mathematics. Free content Linking Lookup box. Favorite Button CITE Translate Facebook Share. Volatility measures the risk of a security. Reproduction of all or part of this glossary, in any format, without the written consent of WebFinance, Inc. The Atlantic Monthly, Volume 17, No.