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This case discusses the central role that volatility plays in understanding the behaviour of the foreign exchange market. The terminology used to measure volatility can be confusing and/or mathematically demanding and is the subject matter of this case. The case explains the measurement aspects of volatility then turns to identifying the sources of volatility. This case is suitable for undergraduate and postgraduate courses with an international finance, international banking or international business component. The themes covered also provide an analytical framework in which multi-national company decision making has to be analysed whether from the point of view of international finance, international marketing or international corporate strategy. It is particularly suitable for business situations where foreign exchange hedging and arbitrage decisions are being discussed.