Option volatility is defined as the square root of the standard deviation of daily percentage changes in the underlying exchange rate.

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Option volatility, often referred to as implied volatility, measures the market's expectation of the future volatility of the option's underlying asset. It is not defined as the square root of the standard deviation of daily percentage changes in the underlying exchange rate, but rather inferred from the market price of the option itself.

Option Volatility Is Defined as the Square Root of the Standard