Variance

Squared volatility measuring return dispersion

What is Variance?

Variance The square of volatility (standard deviation), measuring the average squared deviation of returns from the mean. Variance is the natural unit for many volatility calculations because variances add linearly over time while standard deviations do not. Variance swaps trade variance directly.

Complete Definition

The square of volatility (standard deviation), measuring the average squared deviation of returns from the mean. Variance is the natural unit for many volatility calculations because variances add linearly over time while standard deviations do not. Variance swaps trade variance directly.