The square root of the variance, in the same units as the variable itself. It is the usual measure of volatility.
Where you will meet it
Standard deviation comes up in 64 learning outcome notes across the FRM syllabus.
A few of them:
Using Futures for Hedging FRM Part I · Financial markets and products
“The residual standard deviation of the hedged position follows from it.”
The Building Blocks of Risk Management FRM Part I · Foundations of risk management
“Quantitative measures include standard deviation, sensitivities, value at risk, expected shortfall and stress tests.”
Random Variables FRM Part I · Quantitative analysis
“Its square root is the standard deviation σ.”
Measures of Financial Risk FRM Part I · Valuation and risk models
“The mean-variance framework describes each portfolio by two numbers, expected return and standard deviation, and assumes investors prefer more return and less risk.”
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