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by dojomouse 4437 days ago
No, volatility can increase as well as decrease returns.
1 comments
yummyfajitas 4437 days ago
Downward volatility hurts you more than upward volatility helps you (on average). That's where the -sigma^2/2 term comes from.
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dojomouse 4436 days ago
Yes, so you could write

r + (amount that upward volatility helps) - (amount that downward volatility hurts) > g

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