bkballa

Roy's safety first = (R-Rmin)/sd

This is an access return (over the minimum acceptable return) per unit of risk.. clients might require that their minimum acceptable return is risk-free rate.. in which case, your Roy's safety ratio becomes Sharpe ratio...

You can use either to evaluate which balanced portfolio to choose..

If I say, "I don't want my portfolio fall below -5%", my shortfall risk is -5%.. so you better construct such a portfolio that agrees with my risk tolerance...



Edited 2 time(s). Last edit at Tuesday, May 25, 2010 at 01:16AM by kurmanal.