Indeed. Ultimately, we might prefer high or low variance, but on proper financial markets, the cost of increasing or decreasing variance is negligeable.
Not so. Buying assets in order to hedge risks is one of the fundamental functions of modern finance market, and the motivation for essentially all “interesting” financial instruments (futures, options, CDSs, etc). Note that the prices of options are even talked about as “implied (Black-Scholes) volatility”, and in trader jargon buying or writing options can be referred to as “trading volatility”. Variance is what modern finance is all about.
And casinos charge for high variance.
Indeed. Ultimately, we might prefer high or low variance, but on proper financial markets, the cost of increasing or decreasing variance is negligeable.
Not so. Buying assets in order to hedge risks is one of the fundamental functions of modern finance market, and the motivation for essentially all “interesting” financial instruments (futures, options, CDSs, etc). Note that the prices of options are even talked about as “implied (Black-Scholes) volatility”, and in trader jargon buying or writing options can be referred to as “trading volatility”. Variance is what modern finance is all about.