1. Interest rates can be negative 2. Volatility reduces the average. Take an example of +10% then -10% (1+0.1)*(1-0.1) = 1 - 0.1² = 0.99 < 1. It's due to the "log normal returns"
1. Interest rates can be negative 2. Volatility reduces the average. Take an example of +10% then -10% (1+0.1)*(1-0.1) = 1 - 0.1² = 0.99 < 1. It's due to the "log normal returns"