RachevRatio: Rachev Ratio

In braverock/PerformanceAnalytics: Econometric Tools for Performance and Risk Analysis

Rachev Ratio

Description

RachevRatio computation with standard errors.

Usage

RachevRatio(
  R,
  alpha = 0.1,
  beta = 0.1,
  rf = 0,
  SE = FALSE,
  SE.control = NULL,
  ...
)

Arguments

R	Data of returns for one or multiple assets or portfolios.
alpha	Lower tail probability.
beta	Upper tail probability.
rf	Risk-free interest rate.
SE	TRUE/FALSE whether to ouput the standard errors of the estimates of the risk measures, default FALSE.
SE.control	Control parameters for the computation of standard errors. Should be done using the RPESE.control function.
...	Additional parameters.

Details

The Rachev ratio, introducted in Rachev et al. (2008), is a non-parametric estimator of the upper tail reward potential relative to the lower tail risk in a non-Gaussian setting, and as such, it is particularly useful when returns have a fat-tailed and possibly skewed distribution. For small \alpha and \beta, it is a measure of the potential of extreme positive returns to risk of extremel negative returns.

For lower tail parameter \alpha and lower tail parameter \beta, the Rachev ratio is given by

\frac{ETL_{\alpha}(R_{f}-R_{a})}{ETL_{\beta}(R_{a}-R_{f})}

.

Value

A vector or a list depending on se.method.

Author(s)

Anthony-Alexander Christidis, [e-mail]

References

Rachev, Svetlozar T. et al. (2008). Advanced Stochastic Models, Risk Assessment, and Portfolio Optimization (1st ed.)

Examples

# Loading data from PerformanceAnalytics
data(edhec, package = "PerformanceAnalytics")
class(edhec)
# Changing the data colnames
names(edhec) = c("CA", "CTA", "DIS", "EM", "EMN",
                 "ED", "FIA", "GM", "LS", "MA",
                 "RV", "SS", "FOF")
# Compute Rachev ratio for managers data
RachevRatio(edhec)

braverock/PerformanceAnalytics documentation built on Feb. 16, 2024, 5:37 a.m.