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I agree with all you said except your false claim that my question made
an assumption that is just not there.
In a normal week, there are five trading days and two days where nothing
happens. Using calendar days for determining value using volatility
incorrectly assumes that trading occurs on Saturday and Sunday with an
average volatility dtermined over the period involved. In fact, a
greater volatility occurs over each of the smaller number of trading
days, averaged down by the 0 volatility over the weekend.
As a result, the daily decay during the week is too small, offset by
decay over the weekend when no trading can occur, when calendar days are
used.
Unfortunately there is also a present value component, which is
appropriately taken over calendar days...
DanG
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