Practical Risk-Adjusted Performance Measurement by Bacon, Carl R. -- Read -- Imperial Library of Trantor

Index

Cover Series Page Title Page Copyright Dedication Preface Acknowledgements Chapter 1: Introduction

DEFINITION OF RISK

Chapter 2: Descriptive Statistics

Mean (or arithmetic mean) Annualised return Continuously compounded returns (or log returns) Winsorised mean Mean absolute deviation (or mean deviation) Variance Mean difference (absolute mean difference or Gini mean difference) Relative mean difference Bessel's correction (population or sample, n or n−1) Sample variance Standard deviation (variability or volatility) Annualised risk (or time aggregation) The Central Limit Theorem Janssen annualisation Frequency and number of data points Normal (or Gaussian) distribution Histograms Skewness (Fisher's or moment skewness) Sample skewness Kurtosis (Pearson's kurtosis) Excess kurtosis (or Fisher's kurtosis) Sample kurtosis Bera-Jarque statistic (or Jarque-Bera) Covariance Sample covariance Correlation (ρ) Sample correlation Up capture indicator Down capture indicator Up number ratio Down number ratio Up percentage ratio Down percentage ratio Percentage gain ratio Hurst index (or Hurst exponent) Bias ratio

Chapter 3: Simple Risk Measures

Performance appraisal Sharpe ratio (reward to variability, Sharpe index) Roy ratio Risk free rate Alternative Sharpe ratio Revised Sharpe ratio Adjusted Sharpe ratio Skewness-kurtosis ratio MAD ratio Gini ratio Relative risk Tracking error (or tracking risk, relative risk, active risk) Relative skewness Relative kurtosis Information ratio Geometric information ratio Modified information ratio Adjusted information ratio Relative Hurst

Chapter 4: Regression Analysis

Regression equation Regression alpha (αR) Regression beta (βR) Regression epsilon (ɛR) Capital Asset Pricing Model (CAPM) Beta (β) (systematic risk or volatility) Jensen's alpha (Jensen's measure or Jensen's differential return or ex-post alpha) Annualised alpha Bull beta (β+) Bear beta (β−) Beta timing ratio Market timing Systematic risk R2 (or coefficient of determination) Specific or residual risk Treynor ratio (reward to volatility) Modified Treynor ratio Appraisal ratio (or Treynor-Black ratio) Modified Jensen Fama decomposition Selectivity Diversification Net selectivity Fama-French three factor model Three factor alpha (or Fama-French alpha) Carhart four factor model Four factor alpha (or Carhart's alpha) K ratio

Chapter 5: Drawdown

Drawdown Average drawdown Maximum drawdown (or peak to valley drawdown) Largest individual drawdown Recovery time (or drawdown duration) Drawdown deviation Ulcer index Pain index Calmar ratio (or drawdown ratio) MAR ratio Sterling ratio Sterling-Calmar ratio Burke ratio Modified Burke ratio Martin ratio (or Ulcer performance index) Pain ratio Lake ratio Peak ratio

Chapter 6: Partial Moments

Downside risk (or semi-standard deviation) Pure downside risk Half variance (or semi-variance) Upside risk (or upside uncertainty) Mean absolute moment Omega ratio (Ω) Bernardo and Ledoit (or gain-loss) ratio d ratio Omega-Sharpe ratio Sortino ratio Reward to half-variance Downside risk Sharpe ratio Downside information ratio Kappa (Kl) (or Sortino-Satchell ratio) Upside potential ratio Volatility skewness Variability skewness Farinelli-Tibiletti ratio Prospect ratio

Chapter 7: Extreme Risk

Extreme events Extreme value theory Value at risk (VaR) Relative VaR Ex-post VaR Potential upside (gain at risk) Percentile rank VaR calculation methodology Parametric VaR Modified VaR Historical simulation (or non-parametric) Monte Carlo simulation Which methodology for calculating VaR should be used? Frequency and time aggregation Time horizon Window length Reward to VaR Reward to relative VaR Double VaR ratio Conditional VaR (expected shortfall, tail loss, tail VaR or average VaR) Upper CVaR or CVaR+ Lower CVaR or CVaR− Tail gain (expected gain or expected upside) Conditional Sharpe ratio (STARR ratio or reward to conditional VaR) Modified Sharpe ratio (reward to modified VaR) Tail risk Tail ratio Rachev ratio (or R ratio) Generalised Rachev ratio Drawdown at risk Conditional drawdown at risk Reward to conditional drawdown Generalised Z ratio

Chapter 8: Fixed Income Risk

Pricing fixed income instruments Redemption yield (yield to maturity) Weighted average cash flow Duration (effective mean term, discounted mean term or volatility) Macaulay duration Macaulay-Weil duration Modified duration Portfolio duration Effective duration (or option-adjusted duration) Duration to worst Convexity Modified convexity Effective convexity Portfolio convexity Bond returns Duration beta Reward to duration

Chapter 9: Risk-adjusted Return

Risk-adjusted return M2 M2 excess return Differential return GH1 (Graham & Harvey 1) GH2 (Graham & Harvey 2) Correlation and risk-adjusted return M3 Return adjusted for downside risk Adjusted M2 Omega excess return

Chapter 10: Which Risk Measure to Use?

WHY MEASURE EX-POST RISK? WHICH RISK MEASURES TO USE? WHICH MEASURES ARE ACTUALLY USED? WHICH RISK MEASURES SHOULD REALLY BE USED?

Chapter 11: Risk Control

REGULATIONS IN THE INVESTMENT RISK AREA RISK CONTROL STRUCTURE RISK MANAGEMENT

Glossary of Key Terms Appendix A: Composite Internal Risk Measures Appendix B: Absolute Risk Dashboard Appendix C: Relative Risk Dashboard Bibliography Index