Common use of Volatility Clause in Contracts

Volatility. The prices for financial instruments and securities are subject to some major fluctuations over time. The degree of the price fluctuations within a particular period is referred to as volatility. Volatility is calculated based on historical data using statistical methods. The higher the volatility of a financial instrument, the higher the risk inherent in the investment. However, volatility is based on past changes in prices only and thus is not a reliable indicator for future price trends. Liquidity or fungibility, respectively, describes the investor’s option to be able to dispose of the financial instrument at any time. The basic option to make such disposition is referred to as fungibility. Liquidity means the option to be able to dispose of financial instruments without a sales order, which is deemed of average size common on the market, triggering noticeable or lasting fluctuations in the prices and thus can only be completed at significantly lower rates. In particular tight and illiquid markets may be the reason for difficulties to purchase or sell financial instruments. Some financial instruments are quoted over a long period of time, without any underlying genuine turnover. Completing an order in such markets is not possible immediately, is only possible in part, or at extremely unfavorable terms. This could also result in higher transaction costs. Investors face a currency risk when holding financial instruments in a currency which is not their home country’s currency. The currency risk is realized if the ratio between the investor’s home country currency and the foreign currency increases. Hence, even in the event that the prices increase, such transactions may result in losses. Currencies and foreign exchange are subject to the impact of short-, medium-, and long-term factors. In fact, market views, current political events, speculations, economic developments, interest trends, monetary policy decisions, and macroeconomic factors may influence foreign exchange rates.

Volatility. The prices for financial instruments and securities are subject to some major fluctuations over time. The degree of the price fluctuations within a particular period is referred to as volatility. Volatility is calculated based on historical data using statistical methods. The higher the volatility of a financial instrument, the higher the risk inherent in the investment. However, volatility is based on past changes in prices only and thus is not a reliable indicator for future price trends. Liquidity or fungibility, respectively, describes the investor’s option to be able to dispose of the financial instrument at any time. The basic option to make such a disposition is referred to as fungibility. Liquidity means the option to be able to dispose of financial instruments without a sales order, which is deemed of average size common on the market, triggering noticeable or lasting fluctuations in the prices and thus can only be completed at significantly lower rates. In particular tight and illiquid markets may be the reason for difficulties to purchase or sell selling financial instruments. Some financial instruments are quoted over a long period of time, without any underlying genuine turnover. Completing an order in such markets is not possible immediately, is only possible in part, or at extremely unfavorable terms. This could also result in higher transaction costs. Investors face a currency risk when holding financial instruments in a currency which is not their home country’s currency. The currency risk is realized if the ratio between the investor’s home country currency and the foreign currency increases. Hence, even in the event that the prices increase, such transactions may result in losses. Currencies and foreign exchange are subject to the impact of short-, medium-, medium- and long-term factors. In fact, market views, current political events, speculations, economic developments, interest trends, monetary policy decisions, and macroeconomic factors may influence foreign exchange rates.

Volatility. The prices for financial instruments and securities are subject to some major fluctuations over time. The degree of the price fluctuations within a particular period is referred to as volatility. Volatility is calculated based on historical data using statistical methods. The higher the volatility of a financial instrument, the higher the risk inherent in the investment. However, volatility is based on past changes in prices only and thus is not a reliable indicator for future price trends. Liquidity or fungibility, respectively, describes the investor’s option to be able to dispose of the financial instrument at any time. The basic option to make such disposition is referred to as fungibility. Liquidity means the option to be able to dispose of financial instruments without a sales order, which is deemed of average size common on the market, triggering noticeable or lasting fluctuations in the prices and thus can only be completed at significantly lower rates. In particular tight and illiquid markets may be the reason for difficulties to purchase or sell financial instruments. Some financial instruments are quoted over a long period of time, without any underlying genuine turnover. Completing an order in such markets is not possible immediately, is only possible in part, or at extremely unfavorable terms. This could also result in higher transaction costs. Investors face a currency risk when holding financial instruments in a currency which is not their home country’s currency. The currency risk is realized if the ratio between the investor’s home country currency and the foreign currency increases. Hence, even in the event that the prices increase, such transactions may result in losses. Currencies and foreign exchange are subject to the impact of short-, medium-, and long-long- term factors. In fact, market views, current political events, speculations, economic developments, interest trends, monetary policy decisions, and macroeconomic factors may influence foreign exchange rates.