Blog Posts

Tail Value at Risk (TVaR) – also known as Tail Conditional Expectation or Conditional Tail Expectation (CTE) – is a risk assessment measure that quantifies the average loss in the worst-case scenarios of an investment portfolio. TVaR goes beyond traditional Value at Risk (VaR) by not only identifying the threshold of extreme losses but also quantifying the expected […]

Discounted Maximum Loss (DML), sometimes referred to as a Worst-Case Risk Measure, is a financial metric used to assess the most severe potential loss in an investment or portfolio, adjusted for the time value of money. It evaluates the worst possible scenario for an investment over a specified time horizon, taking into account the probability […]

Indifference Price, also known as Reservation Price or Private Valuation, refers to the specific price at which an individual is indifferent between buying or selling an asset, or between alternative investments. It represents the threshold where the utility or satisfaction gained from holding or selling the asset is exactly equal.   Key Takeaways – Indifference […]

Stochastic Dominance is a concept used in decision theory and economics to compare and rank different probability distributions based on their expected utilities. It provides a method for deciding whether one trade or investment is preferable to another (under uncertainty) without making specific assumptions about an investor’s/trader’s utility function.   Key Takeaways – Stochastic Dominance […]

Jensen’s Alpha is a performance metric used in finance to determine the excess return of an investment portfolio over the expected return predicted by the Capital Asset Pricing Model (CAPM). Developed by Michael Jensen in the 1960s, this metric is a popular tool for evaluating the skill of portfolio managers.   Calculation & Formula of […]

The Simple Dietz Method and the Modified Dietz Method are both performance measurement techniques used to calculate the rate of return on an investment portfolio. These methods are particularly useful for calculating returns over short time periods and are widely used due to their simplicity and effectiveness. Key Takeaways – Simple Dietz Method vs. Modified […]

Maximum Downside Exposure (MDE) is a risk metric used in finance to measure the most significant loss that an investment or a portfolio could have experienced over a specified period. This measure is useful for understanding the worst-case scenario risk. So, it gives an idea of the potential losses a trade or investor might face […]

The Modigliani Risk-Adjusted Performance (M2, RAP) is a performance measure for an investment or trading portfolio. It extends the concept of the Sharpe Ratio by adjusting a portfolio’s returns for risk. But it presents the results in a more intuitive, percentage-rate-of-return format.   Calculation and Components Formula M2 is calculated by first determining the Sharpe […]

Conic solvers are used in financial optimization, where accuracy and computational efficiency are most important. Financial optimization involves the use of mathematical models to make optimal decisions regarding trading and investment decisions and risk management. This field often requires dealing with complex constraints and objectives. This is where conic solvers come into play.   Key […]

Downside Beta and Upside Beta, collectively referred to as Dual-Beta, are concepts in finance used to measure the volatility of an asset in relation to a benchmark but in two different scenarios: negative (downside) and positive (upside) market movements This bifurcation allows traders/investors to understand how an asset behaves under varying market conditions. This provides […]