# Volatility conspiracy

## Natural gas

Trainee accountants are taught that ‘cash is real but profit is an accounting concept’. Similarly, we should tell ourselves ‘prices are real but volatility is a quantitative concept’.

When a quant speaks of volatility, there are two things he or she may have in mind. It could be something to do with changes in a traded market price. Or it could be something rather esoteric to do with option prices. The words ‘local’ or ‘instantaneous’ refer to the first meaning, whereas ‘implied’