VarGamma: A Unified Measure of Portfolio Risk
Kent Osband Most portfolio risk analysis implicitly assumes that risks are stable, despite copious evidence of instability. This article presents an alternative, VarGamma, that provides neat formulas for certainty equivalents (risk-adjusted returns) even with stochastic volatility and volatility-dependent drift. VarGamma measures are far more flexible and robust than standard mean-variance formulations or quantiles (VaR), with
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