Tag Info

1) People usually consider an instantaneous covariance while you are considering a integrated covariance. In a model $$dS_t = S_t \cdot (\alpha(t)dt + A(t)dW_t)$$ the integrated covariance of log-returns is simply the integral over time of the instantaneous covariance:  Cov(R_i(t),R_j(t)) = (i,j)\textrm{-coeff. of} \int_0^t \underbrace ...