V

Value at Risk

A method of assessing the impact of market movements on a portfolio of assets, value-at-risk measures the potential loss in market value of a portfolio within a given probability over a pre-determined time horizon.

Variance

The mean squared deviation from `the expected value - a measure of variability.

Variance-covariance matrix

A matrix showing variances of, and co-variances between, a number of different market variables. A technique often used in calculating the value-at-risk of a portfolio containing two assets.

Vega

The rate of change in the price of an option (or other derivative) with volatility.

Vega Neutral Portfolio

A portfolio with a vega of zero

Volatility

A measure of the uncertainty of the return realised on an asset.

Volatility Matrix

A table showing the variation of implied volatilities with strike price and time to maturity

Volatility Skew

A term used to describe the volatility smile when it is non-symmetrical

Volatility Smile

The variation of implied volatility with strike price.

Volatility Term Structure

The variation of volatility with time to maturity.

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