Search results
Results from the WOW.Com Content Network
The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. [1] It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return , while the Sharpe ratio penalizes both upside and downside volatility equally.
Sortino and Steven Satchell at Cambridge University co-authored the first book on PMPT. This was intended as a graduate seminar text in portfolio management. A more recent book by Sortino was written for practitioners. The first publication in a major journal was co-authored by Sortino and Dr. Robert van der Meer, then at Shell Oil Netherlands.
As a consequence, the Rachev ratio is always well-defined. In the ex-ante analysis, optimal portfolio problems based on the Rachev ratio are, generally, numerically hard to solve because the Rachev ratio is a fraction of two CVaRs which are convex functions of portfolio weights. In effect, the Rachev ratio, if viewed as a function of portfolio ...
Downside risk was first modeled by Roy (1952), who assumed that an investor's goal was to minimize his/her risk. This mean-semivariance, or downside risk, model is also known as “safety-first” technique, and only looks at the lower standard deviations of expected returns which are the potential losses.
The upside-potential ratio is a measure of a return of an investment asset relative to the minimal acceptable return. The measurement allows a firm or individual to choose investments which have had relatively good upside performance, per unit of downside risk .
The standard form of the Omega ratio is a non-convex function, but it is possible to optimize a transformed version using linear programming. [4] To begin with, Kapsos et al. show that the Omega ratio of a portfolio is: = [() +] + The optimization problem that maximizes the Omega ratio is given by: [() +], (), =, The objective function is non-convex, so several ...
Modigliani risk-adjusted return is defined as follows: Let be the excess return of the portfolio (i.e., above the risk-free rate) for some time period : . where is the portfolio return for time period and is the risk-free rate for time period .
In this posting titled, “Sortino ratio”, Rom states: “The Sortino ratio was created in 1993 by Brian Rom.” The fact is: At the direction of Dr. Sortino, Dr. Forsey wrote the source code to calculate the Sortino ratio for the PRI software Rom was marketing long before Rom’s 1993 article.