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Let's assume you start out with 50000 dollars and no SPY, i.e. the position is (cash,spy) = (50000,0). After the first trade the position is (50000-100*127,100) = (37300,100) and the value is still 50000. After the second trade the position is (37300+87*125,100-87) = (48175,13) which has a value 48175+125*13 = 49800. So you have a loss of 200. And so on and ...


The arithmetic average of +100% in Year 1 and -100% in Year 2 is 0%, but I we all know the result is not a 0% return. So arithmetic returns are absurd to use in any real life context. Maybe in another universe they can serve some purpose.


It's French for bound or limit (the authors are French) and it means whatever they define it to be ;) I'm was not aware of this concept before and so I don't know a description or definition in English of the same.

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