Risk management under Omega measure
Portfolio Management
2017-04-12 v2 Optimization and Control
Abstract
We prove that the Omega measure, which considers all moments when assessing portfolio performance, is equivalent to the widely used Sharpe ratio under jointly elliptic distributions of returns. Portfolio optimization of the Sharpe ratio is then explored, with an active-set algorithm presented for markets prohibiting short sales. When asymmetric returns are considered we show that the Omega measure and Sharpe ratio lead to different optimal portfolios.
Keywords
Cite
@article{arxiv.1510.05790,
title = {Risk management under Omega measure},
author = {Michael R. Metel and Traian A. Pirvu and Julian Wong},
journal= {arXiv preprint arXiv:1510.05790},
year = {2017}
}