Related papers: The implied Sharpe ratio
The Sharpe ratio is a way to compare the excess returns (over the risk free asset) of portfolios for each unit of volatility that is generated by a portfolio. In this paper we introduce a robust Sharpe ratio portfolio under the assumption…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
Sharpe ratio (sometimes also referred to as information ratio) is widely used in asset management to compare and benchmark funds and asset managers. It computes the ratio of the (excess) net return over the strategy standard deviation.…
In this paper, we mainly study the impact of the implied certainty equivalent rate on investment in financial markets. First, we derived the mathematical expression of the implied certainty equivalent rate by using put-call parity, and then…
We develop a theory for pricing non-diversifiable mortality risk in an incomplete market. We do this by assuming that the company issuing a mortality-contingent claim requires compensation for this risk in the form of a pre-specified…
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the…
We consider a reference security, understood to be an attractive investment, with the caveat that an investor is not willing to directly invest in the security, for presence of constraints, either investor specific or pertaining to the…
We introduce a new measure of performance of investment strategies, the monotone Sharpe ratio. We study its properties, establish a connection with coherent risk measures, and obtain an efficient representation for using in applications.
In the present paper, using a replica analysis, we examine the portfolio optimization problem handled in previous work and discuss the minimization of investment risk under constraints of budget and expected return for the case that the…
Sharpe ratio is widely used in asset management to compare and benchmark funds and asset managers. It computes the ratio of the excess return over the strategy standard deviation. However, the elements to compute the Sharpe ratio, namely,…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
The Sharpe ratio, which is defined as the ratio of the excess expected return of an investment to its standard deviation, has been widely cited in the financial literature by researchers and practitioners. However, very little attention has…
Option prices encode the market's collective outlook through implied density and implied volatility. An explicit link between implied density and implied volatility translates the risk-neutrality of the former into conditions on the latter…
In this paper we take a look at a simple portfolio insurance strategy using a protective put and computationally derive the investor's governing utility structures underlying such a strategy under alternative market scenarios. Investor…
We develop a theory for valuing non-diversifiable mortality risk in an incomplete market. We do this by assuming that the company issuing a mortality-contingent claim requires compensation for this risk in the form of a pre-specified…
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…
This paper develops and empirically evaluates a Sharpe-driven stock selection and liquidity-constrained portfolio optimization framework designed for the Chinese equity market. The proposed methodology integrates three sequential stages:…
Returns distributions are heavy-tailed across asset classes. In this note, I examine the implications of this well-known stylized fact for the joint statistics of performance (absolute return) and Sharpe ratio (risk-adjusted return). Using…
We present a new methodology of computing incremental contribution for performance ratios for portfolio like Sharpe, Treynor, Calmar or Sterling ratios. Using Euler's homogeneous function theorem, we are able to decompose these performance…