Volatility Harvesting

An intriguing read, “Volatility Harvesting: Extracting Return From Randomness” covering a range of topics including volatility pumping, volatility harvesting, Parrondo’s Paradox, and Shannon’s Demon.

ABSTRACT. Studying Binomial as well as Normal return dynamics in discrete time, we explain how, in zero-growth environments, trading strategies can be found which generate exponential growth of wealth. We include numerical results for simulated and real world processes confirming the observed phenomena while also highlighting implicit risks.