The author(s) of this report may personally hold material positions in BTC. The authors have not pur
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Jason Pagoulatos + 1 other

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Expected value is calculated as follows:
The answer is, well, it depends on if we are finally being compensated for the additional risk!
Asset A and Asset B are both priced equally at $1,000. Asset A has a guaranteed return (thus expected return) of 10%, yielding an NAV of $1,100 after a period of 12 months. Asset B has an expected return of 10%, with an actual NAV varying from $500 to $1,500. Asset A is priced like a fixed income asset, while Asset B resembles a return profile more akin to that of a stock.
After some time, the market will have determined a new fair value for Asset B relative to Asset A. In this simple example, we can see that the market has sold Asset B down to a price of $900 while Asset A remains at $1,000. With this shift in asset pricing, the expected return of Asset B has now increased considerably, making it a much more attractive option.