Investment process in dynamic framework - meeting investment criteria
The discussion presented above brings us to the conclusion that volatility is basic factor that has influence on meeting investment objective. Volatility, usually measured as standard deviation of returns, has been studied extensively since 60 years. These studies were commenced by Harry Markowitz, who proposed to measure stock price risk through variance of returns. Option pricing theory, initiated by Black-Scholes-Merton model has played even more important role in the volatility studies. In this model volatility (measured as standard deviation of returns) is crucial factor that has influence on option value. (fragment tekstu)
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