A measure of the implied volatility (implied vol) of a financial instrument over a certain period or span of time in the future, inferred from the term structure of volatility (depicting different implied volatilities for related financial instruments that have different maturities). Given that forward volatility is unknown as of the time it is needed, various techniques can be used to predict future implied volatility with a specific degree of precision. Available data related to historical volatility (as measured using standard deviation) can be analyzed to construct a meaningful future pattern. Implied volatility can provide an indication of the future volatility of an instrument/ asset, etc.

Implied volatility is commonly figured out using pricing models. The market expectation of forward volatility can be based on “expected” or “anticipated” rate of price change of an instrument/ asset (e.g., a security). In this sense, forward volatility is an estimation of the expected/ anticipated change in implied volatility for a future period.