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Volatility management Meaning

Volatility management encompasses techniques and strategies used by traders, investors, and portfolio managers to mitigate the impact of price swings on their holdings. Methods include diversification across asset classes, systematic rebalancing, the use of options and futures for hedging, and employing dynamic position sizing based on volatility measures.

Some investors follow volatility-targeting strategies, adjusting their exposure to risky assets when volatility rises or falls. In crypto markets, protocols and funds have emerged that seek to provide smoother returns by algorithmically shifting between volatile assets and stablecoins.

Effective volatility management not only protects portfolios during downturns but can also enhance returns by capitalising on periods of high volatility when risk is well-managed.

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