Creating portfolio risk and return models [25]

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Bullet points include: In practice, the assumption that time can be sliced up into infinitesimal units does not always work Markets may be closed (e.g. overnight) Liquidity risk and transaction costs Reward (and risk) may evolve through time (as new information arrives) And, as importantly, it may not be what the client/user wants or thinks works Risk exposures may be perceived to be intrinsically long-term The long-term might technically consist of lots of intermediate short-terms, but the simplest and most effective way of handling the need to somehow aggregate these short-terms together may be to consider them all at once

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