"Volatility as an Asset Class"

There is plenty of nonsense in the discussions about volatility as an "asset class". Volatility is not a tangible object like a tomato; it is abstract and far more complicated than a stock. I can buy a chair or a stock for a price p and sell it at p + something. Volatility is not tangible outside explicit volatility contracts. I gave last night's lecture at Courant on why anyone "reifying" volatility is causing trouble. There are four problems with the measurement of volatility and the capturing of the properties--even outside the world of scalable laws. The notes will be posted here.

These blog entries may be part of the next edition of Dynamic Hedging (still far away).