We make special note in return calculations-arithmetic vs. logarithmic - why don't we seem to be...

  

Transcribed Image Text:

We make special note in return calculations-arithmetic vs. logarithmic - why don't we seem to be concerned about that for risk calculations (in particular, for standard deviations); c should we? Are there any assumptions implicit in this regard? (Hint: think about the price process as Geometric Brownian motion, Ito's lemma, and the consequence on the volatility.) We make special note in return calculations-arithmetic vs. logarithmic - why don't we seem to be concerned about that for risk calculations (in particular, for standard deviations); c should we? Are there any assumptions implicit in this regard? (Hint: think about the price process as Geometric Brownian motion, Ito's lemma, and the consequence on the volatility.)