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Creating portfolio risk and return models [24]

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Bullet points include: Most models focus on relatively small time-steps In the limit, if models satisfy certain regularity conditions (e.g. well defined and finite cumulative quadratic variation) then they can be recast into Brownian motion C.f. Black-Scholes Central limit theorem (CLT) So usually focus on Normal innovations Although more complicated (short-term) innovations are possible (e.g. generalisations of CLT and sum-stable models)

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