Article by: Eric Brandhorst, CFA, Director of Research, Global Structured Products Group
Published by: SSgA CAPITAL INSIGHTS
“Mention the word volatility to an investor, especially in these recently turbulent times, and what comes immediately to mind is risk, sudden change, erratic behavior, loss and uncertainty—certainly not investable asset class.
“Yet, as we’ll see, there’s a good case to be made for volatility as an asset class, even though there are clearly no coupons or dividends to collect, and there is no claim on an underlying stream of earnings or productive assets.
“As an investment characteristic, volatility describes how much investment returns either have varied, or are expected to vary, from the average over some period of time. Volatility is a common measure of investment risk, and the standard deviation of realized returns is a common measure of volatility where returns are assumed to be normally distributed.”
Full article (PDF): Link