# Implied Volatility

In financial mathematics, the implied volatility (IV) of an option contract is the value of the volatility of the underlying instrument which, when input in an option pricing model (such as Black–Scholes), will return a theoretical value equal to the current market price of said option. A non-option financial instrument that has embedded optionality, such as an interest rate cap, can also have implied volatility. Implied volatility, a forward-looking and subjective measure, differs from historical volatility because the latter is calculated from known past returns of a security. To understand where implied volatility stands in terms of the underlying, implied volatility rank is used to understand its implied volatility from a one-year high and low IV.

Please read the following articles to better understand Implied Volatility on Uniswap v3:

{% embed url="<https://medium.com/gammaswap-labs/calculating-implied-volatility-from-uniswap-v2-v3-e466e49d60e0>" %}

{% embed url="<https://lambert-guillaume.medium.com/on-chain-volatility-and-uniswap-v3-d031b98143d1>" %}


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