$ While in the "work case" you liquidate the portfolio at $t_1$ realising its PnL (let me simplify the notation a tiny bit)Depreciation = value at the beginning of the yr (opening equilibrium) + buys inside the calendar year ? worth at the conclusion of the yr (closing balance)At the end of the day, the EV/Avg(PNL) boils right down to iv vs rv of i