What Is the Difference between Historical and Implied Volatility?
Historical volatility (HV) is a backward-looking measure, calculated from the past price movements of the underlying asset over a specific period. Implied volatility (IV) is a forward-looking measure, derived from the current market price of an option.
IV reflects the market's expectation of future volatility and is the critical input used in option pricing models.
Glossar
Past Price Movements
Volatility ⎊ Past price movements, within cryptocurrency and derivatives markets, represent a historical record of asset price fluctuations, crucial for assessing risk parameters and informing option pricing models.
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.