What Is the Difference between Implied Volatility (IV) and Historical Volatility (HV)? ⎊ Path

What Is the Difference between Implied Volatility (IV) and Historical Volatility (HV)?

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 the option, representing the market's expectation of future price movement.

HV is an objective, calculated statistic, while IV is a subjective, market-driven expectation.

What Is the Relationship between Historical Volatility and Implied Volatility?

What Is the Difference between “Implied Volatility” and “Historical Volatility”?

What Is the Difference between ‘Implied’ and ‘Historical’ Volatility?

What Is the Difference between “Historical Volatility” and “Implied Volatility”?

Does a Change in the Underlying Asset’s Price Directly Change the Historical Volatility?

How Does ‘Implied Volatility’ Differ from ‘Historical Volatility’?

What Is a ‘Volatility Arbitrage’ Strategy Based on the IV/HV Relationship?

How Is Historical Volatility Typically Annualized for Comparison with Implied Volatility?

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.