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Downward volatility hurts you more than upward volatility helps you (on average). That's where the -sigma^2/2 term comes from.
by yummyfajitas 13y ago
Downward volatility hurts you more than upward volatility helps you (on average). That's where the -sigma^2/2 term comes from.
- dojomouse 13y agoYes, so you could write r + (amount that upward volatility helps) - (amount that downward volatility hurts) > g