Standard Approach to Estimating Volatility (Equation 15.1 Define on as the volatility per day between day n-1 and day n, as estimated at end of day n-1 · Define, as the value of market variable at end of day i Define ui= In(S /Si-1)
Extend Proposition 151.1 (the Perfect Folk Theorem with discounting) to arbitrary mixtures of payoff profiles of the original game G =(, (A Ui) ) Allow for both rational and real weights on the set of profiles {u(a): a E A}; note that the statement of the result will involve an approximation of the payoff profile