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arxiv: 1510.05790 · v2 · pith:JCCYW3L5new · submitted 2015-10-20 · 💱 q-fin.PM · math.OC

Risk management under Omega measure

classification 💱 q-fin.PM math.OC
keywords measureomegaratiosharpeportfolioreturnsunderwhen
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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.

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