How Does Implied Volatility Differ from Historical Volatility?
Historical volatility (HV) is a backward-looking measure calculated from the actual price movements of an asset over a specified past period. Implied volatility (IV) is a forward-looking measure derived from the current market price of an option, representing the market's expectation of future price movements.
HV is a factual input, while IV is a subjective, market-derived expectation used in option pricing.
Glossar
Historical Volatility
Evidence ⎊ This metric is derived from the time-series of past asset prices, representing the actual realized dispersion of returns over a defined historical window.
Implied Volatility
Expectation ⎊ This value represents the market's consensus forecast of future asset price fluctuation, derived by reversing option pricing models using current market premiums.