Sorry this might sound a silly question, but -humbly- I don't understand why models assume that returns range from [-∞,+∞] instead of [-stoplimit, +takeprofit].
A common objection to most models is "it works with normal return distributions, but real return distributions have fat tails"
But why worry about fat tail distributions and potentially infinitely negative returns, if we can just use stoploss / takeprofit barriers to constrain returns within some arbitrary range?
I appreciate that stoploss barriers are not guaranteed in turbulent times, but then one could use a tighter barrier for an extra-safety margin ...
thanks for your thoughts!