Blog Posts

The V2 Ratio, less commonly discussed in mainstream finance literature, is a measure of investment performance and risk. It’s designed to provide a more comprehensive view of a portfolio’s risk-adjusted return. It’s focused on the volatility of returns and the consistency of outperformance relative to a benchmark.   Key Takeaways – V2 Ratio Enhanced Risk […]

The Calmar Ratio is a performance metric used in the finance industry to evaluate the risk-adjusted return of an investment portfolio, particularly focusing on downside risk. Named after its creator, Terry W. Young, the “Calmar” in Calmar Ratio stands for California Managed Accounts Reports. This ratio is often used by hedge funds and other investment […]

Downside Risk refers to the potential for an investment to decrease in value, specifically focusing on the likelihood and magnitude of negative returns. This concept is used in financial risk management as it provides a more nuanced understanding of the risks investors face – beyond the traditional metrics that consider overall volatility.   Key Takeaways […]

Semivariance is a statistical measure used in finance to assess the downside risk of an investment or portfolio. Unlike variance, which considers both upside and downside volatility, semivariance focuses solely on the negative variation of returns. It provides a more targeted measure of risk that is particularly relevant for risk-averse investors.   Key Takeaways – […]

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 […]