Volatility
Volatility is a key risk indicator that reflects fluctuations in the value of an investment during a specified period. Higher volatility means that the value of the investment shows greater upward or downward fluctuations, making the investment in the financial product riskier. Volatility provides investors with an important insight into the risk profile of an investment. However, it is important to emphasize that past volatility values are no guarantee of future performance.
In the P2P lending space, volatility is comparatively low compared to other types of investments. This is because risk can be minimized through careful diversification of investments. By broadly spreading the capital across different borrowers, possible defaults of individual loans can be better compensated.
Nevertheless, it is advisable to find out exactly about the specific volatility of a financial product before investing and to take into account the individual risk tolerance.
