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Expertise on volatility

Tuesday, June 19, 2007

Mean reversion is driven by pain and pleasure rather than greed and fear.

A SQUARE :: 19Jun07 Expertise on volatility
Category	Volatility
Faculty	Peter Van Kleef
Expertise	Volatility
Author	Sona Blessing
Losses are often the result of “bad luck” - and suggest that the strategy being followed is one that is based on luck as opposed to skill. This is cause for concern. Hence it is important to determine and understand what caused the drawdown rather than fret over the fact that it exists. The nice thing about volatility is that keeping relative prices at unreasonable levels is very expensive. Mean reversion for closely related products therefore tends to be exceptionally reliable.
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