Understanding the Four Measures of Volatility By Scott Rothbort

Updated from 3/8/2007 at 2:15 p.m. EST

“Volatility” is a term that is increasingly interjected into financial market commentary by the press and professionals. In fact, Bloomberg Radio has a daily “Volatility Report.” While the term is being thrown around with a seemingly high degree of expertise, I find that the concept is not well understood by most commentators and the average investor. This module of TheStreet University will cover the four main types of volatility measures:

◾historical volatility;
◾implied volatility;
◾the volatility index; and
◾intraday volatility.

Type 1: Historical Volatility

Volatility in its most basic form represents daily changes in stock prices. We call this historical volatility (or historic volatility) and it is the starting point for understanding volatility in the greater sense. Historic volatility is the standard deviation of the change in price of a stock or other financial instrument relative to its historic price over a period of time. That sounds quite eloquent but for the average investor who does not command an intimate knowledge of statistics, the definition is most overwhelming.

Think of a Pendulum

To help you visualize the concept of volatility, think of a pendulum like in the picture below. The pendulum is constructed from a steel ball, attached to a rope and then suspended from a ceiling.

http://www.thestreet.com/content/image/38564.include

The pendulum starts at the resting state when our ball is at point 2 (the mean). If you raise the ball to point 1 and let it go, the ball would then swing from point 1 to point 3. Over time that ball will swing back and forth always passing though point 2. If this were a stock, the difference in distance from point 1 to point 2 or from point 2 to point 3 represents the volatility in the movement of the stock price.

So as not to get into any trouble with physicists out there, the formulas for standard deviation and movement of a pendulum are different and I am not equating the two from a statistical perspective. Rather, I am only using the pendulum as a visual aide. Stocks with a swing that is greater from point 1 to point 2 vs. that of another stock will have a higher volatility than the other stock.

Now imagine a wind hitting the metal ball. The force of that wind will increase a stock’s volatility. Market corrections, increases in uncertainty or other causal factors of risk will be the wind that shifts volatility higher. Say that there is no wind, but rather calm over the markets. Since there is no outside force to apply motion to the pendulum, the arc of the movement from point 1 to point 3 will decrease. This is when volatility declines. Some call this complacency, but it is generally viewed as a market with low or declining volatility.

Source : http://www.thestreet.com

TERRAINS@Atv006kiranraj

T- Trade
E-Execute
R-Review
R-Rate
A- Analyse
I-Indulge
N-Nudge
S-Sacrament

Terrain , this encourages me to take up this training initiative for StockMarkets, to operate as a consultant, to work on development as a trader, on trades & trade offs.

discuss on log about leverage, per se quid pro quo.

Ms KiranRaj SP
Sole Proprietor / owner / Director

Adventure Terrain Ventures.

Risk-Based Testing and Metrics [article] Risk Analysis Fundamentals and Metrics for Software Testing By TechWell Contributor – July 19, 2001

Summary:

Risk-based testing is reviewed and presented as a case study using it on a system test for a retail banking application with complex test requirements. Test documentation produced prior to test execution was kept to a minimum with responsibility passed to the individual tester. To support this approach, progress tracking metrics were used to track actual progress made and to calculate the resources required to complete the test activities.

Risk-based testing is reviewed and presented as a case study using it on a system test for a retail banking application with complex test requirements. Test documentation produced prior to test execution was kept to a minimum with responsibility passed to the individual tester. To support this approach, progress tracking metrics were used to track actual progress made and to calculate the resources required to complete the test activities.

Want to Go From MBA to CEO? Executives Will Need These Skills in 2039 By Paul Leinwand and Gary L. Neilson August 29, 2014

Good news for today’s MBA grads: The share of large company chief executives with graduate business degrees has grown nearly 50 percent in the past 10 years. But don’t start decorating your corner office yet. There’s a lot to learn before you’re ready to take the CEO chair.

Digitization and globalization will change industries in ways we can just begin to imagine today. Everything will move faster—people, teams, trends, portfolios, and competitors. Companies will find it harder to meaningfully differentiate themselves, and they will need to make complex trade-offs when deciding where to invest for growth.

Future CEOs will have be comfortable working in a reconfigured C-suite. A new role, that of chief resources officer, will probably evolve from today’s chief human resources officer. This person will help the company respond to shortages of natural resources, shifting demographics in the workforce, and all other non-financial resources. And tomorrow’s CEO is likelier than ever to be female: We anticipate that about a third of 2040’s incoming CEOs at large public companies will be women, up from just 3 percent today.

The average CEO starts the job at 52. If you’re 27—the average age of a Harvard MBA—that gives you 25 years to prepare. Here’s what we think CEOs will encounter in 2039, as well as five areas in which you can start building skills to help you succeed as one of the CEOs of tomorrow:

Develop a strategy and execute it.
Possible strategies will come and go quickly. Many will be unfamiliar, so it will be harder than ever for CEOs to find the right balance between attractive opportunities and those their companies can win.

Most companies don’t align strategy and execution well at all. It will be your job to fix this. The most successful strategies are built on what your company is able to do better than any other—its handful of differentiating capabilities. Learn how to define your company by what it does, not what it sells. Identify the capabilities core to that identity, use them as a filter for choosing opportunities, and ensure that the entire organization delivers on that promise.

Manage resources as strategic investments.
A company can’t thrive without putting resources toward what matters most—and that’s not happening today. As CEO, you will need to realize that allocating resources equally across the board is not a winning formula. Treat costs as investments and budgeting as an opportunity to align your company more closely to your strategy. Outsource or team up to accomplish the many tasks your company doesn’t need to do better than others. Learn to focus more money and time than your competitors do on the few differentiating capabilities that matter most to your success, and cut back drastically everywhere else.

Build strong, flexible, teams from across the enterprise.
Every distinctive capability relies on contributions from many different functions, such as sales, marketing, IT, distribution, legal, and so on. Think of Apple’s (AAPL)intuitive interface and design capabilities or Amazon’s (AMZN)distribution and data analytics. Integrating all these functions is a huge task and one most companies struggle with today.

As CEO, you and your executive team will need to ensure that your people work together in a coherent system and continuously deliver on and improve your company’s few distinctive capabilities as the marketplace changes. All this will require you to master the architecture of collaboration, calling on empathy, emotional intelligence, and long experience on different kinds of teams.

Be a great connector.
The vast majority of executives say their company’s overall business strategy isn’t well understood across the company and that it only moderately guides decision-making.

To get your company out of that hole, you’ll need to be a master communicator. In a more transparent, always-on world, with more stakeholders interested and invested in what your company is up to, you’ll need to communicate extensively. You’ll need to build wide-ranging partnerships and other links across enterprises. These might be formal links with other companies that contribute to your products or services, longstanding partnerships with non-governmental organizations to provide social goods, or building relationships with your industry’s regulators around the globe. Doing all this will require extraordinary listening, speaking, writing, and engagement abilities. Hone those skills in every activity you undertake.

Deploy technology as a competitive advantage.
Technology is already a disruptive force changing the structure of most industries. It will only become more powerful. You, as a CEO, will need to have a deep understanding of IT across the enterprise—far greater than any present-day CEO. You’ll also need to be expert in flexible digital business models that allow you to constantly test, improve, and change your offerings, consumer technologies that shape customer engagement, and data analytics that surpass today’s Big Data.

Luckily, many of you are already steeped in technology. The key here is to stay that way and to ensure you are expert in the technologies most crucial to your company’s differentiating capabilities and most likely to disrupt your industry.

Being a CEO is a big job, and by 2040 it will only get bigger. Focusing on developing skills in these five areas should prepare you well for the corner office.

SOURCE : http://www.bloomberg.com

The Power of Positive Disruption – By Andra Brooks

The Power of Positive Disruption

//

At the beginning of the year we looked at ‘leading intentionally’ – adopting a leadership mindset in which one’s ‘purpose’ and ‘role’ are fundamentally connected and understood. Leading intentionally enables us to lead authentically and with a sense of mandate and purpose, equipping us to tackle challenges head-on because we remain grounded by the ‘intention’ of what we’re doing.

When leading intentionally, the power of positive disruption is an important concept to understand and to adopt. At its simplest – the concept is about making hard changes in the environment around us. As a leader and depending on the amount of clout you may have – this can mean anything from changing your leadership team through to changing the prevailing culture within the organization. It is vital to understand that real change only comes about when the current status quo is disrupted and a ‘new course’ is set.

Change is good

positive-disruptionPeople are frightened of change. Well, most people. In an organizational context, we are all familiar with the stereotype of the co-worker who just abhors change, stating instead that “this is how we’ve always done things around here”. The trouble is, and especially in the context of the business world, if you are not an agent for change, you risk falling behind your competitors who are more innovative, adaptable and forward thinking than you are. Being a change agent (aka a positive disrupter) doesn’t mean ‘throwing the baby out with the bath water’ or simply instigating ‘change for change’s sake’ – but it does mean pro-actively, assertively and with 100% commitment – creating an environment in which things that don’t work very well, can and will be done differently. This will ruffle feathers and scare some – but it must be done. The more confident you are in your own actions – the easier it is to take people with you. People gravitate towards leaders who have a strong sense of purpose and direction and a deep belief in their own convictions.

Remember that change for change’s sake is not the goal. However, the reality is that in all organizations, some parts operate much more successfully than others. Oftentimes, some parts are simply not fit for purpose. This may be your customer feedback mechanism; the way your accounts department runs; your hiring process; your reward criteria, etc. There is most definitely something within your organization that can and should be overhauled to better meet the needs of your customers and stakeholders.

Baby steps or root and branch change?

This is a key question. Do you make small changes that create positive disruption – or huge, sweeping changes that are experienced as drastic by those around you? The answer, ultimately, depends on what needs changing. If we stick with our leadership mindset which is to lead intentionally – we know that by linking our purpose with our remit, we have given ourselves permission to do what is needed. Our stakeholders are relying on us to do the ‘right thing’ for the organization and if doing so means radical change, then this is what must be done.

At the core of positive disruption is the understanding that you have to actually make change happen. We frequently use phrases like ‘talking the talk, walking the walk’ and in the context of positive disruption, this phrase is never more relevant. We all have good ideas, can talk about what we might do differently and perhaps even get buy-in from above. But until and unless these ideas take physical form – their chance of success is low.

Physical form means positively disrupting the status quo – invariably telling people to stop doing what they’ve always been doing, and to adopt a new approach. To be really effective and to increase the chance of success – this does not mean simply applying a Band-Aid – it means going into the operating theatre.

Positive disruption in practice

Identify an area that really needs overhauling. If you are new in post, consider starting with something small before taking on the bigger challenges. Look and listen to catch the waves of change that others are sponsoring.

Do a gap analysis on a piece of paper. On the left hand side, jot down the attributes of where you are now. What does the issue look and feel like? On the far right hand side, write down what great looks and feels like.

The center-section of the paper is the ‘gap’. It is the ‘no man’s land’ made up of quicksand in which ideas often sink or get shot down all too easily. Think radically of how this gap can be ‘bridged’, not by gingerly walking from left to right, but either through ‘heavy engineering’ or better still, an innovative ‘aerial assault’ that will traverse the gap – something that cannot be easily sabotaged at ground level.

Challenge yourself, and those you trust, to come up with radical ideas that will facilitate the change… then put these into practice.

Once you’ve plotted the new course – get your hands on the tiller and turn the wheel – hard. There will be choppy water ahead, but once you’ve navigated through this – you’re into new territory.

Today, not tomorrow

It all comes down to the status quo. Do not put off today what you believe can wait. Just do it. Be clear about what needs changing and stick to your guns. Don’t feel the weight of ‘what’s been done before and hasn’t worked’. If you’re a leader and you understand your business and what needs changing – forging ahead with brave new initiatives is what you’re paid to do. Don’t be afraid to make radical decisions. If they’re grounded in business rationale (i.e. you’re overhauling a department, product line or business issue that is failing) then things must change and positive disruption is the start point.