Virtually, everyone who is interested in financial markets seems to agree on two things: that markets are now more volatile than ever, and that volatility causes many problems. Volatility is difficult to analyze because it means different things to different people. People are rarely precise when they talk about volatility. Also, there is a lot of misinformation about volatility. Volatility is the most basic statistical risk
measure. It can be used to measure the market risk of a single instrument or an entire portfolio of instruments. Volatility defined in simple terms refers to variations or fluctuation in the price of financial assets such as stocks, exchange rates or interest rates over a period
of time. Mullins (2000) defined volatility as: The degree to which the price of a security, commodity, or market rises or falls within a short-term period.