2
votes
2answers
142 views

Calculate Daily Returns for Sharpe Ratio

For the purposes of Sharpe ratio, I calculate a trading strategy's daily returns using realized P/L only: $$ \frac{K(t + 1) - K(t)}{K(t)}, $$ where $K(t)$ is the cash balance after market close on day ...
0
votes
4answers
371 views

compute sharpe ratio for options?

Calculating sharpe ratio for shares is a straight forward task: (average returns - risk free ) / standard deviation. However i remain baffled as to how to tackle the task for options, can someone ...
1
vote
1answer
278 views

How to download risk free rate?

I've been trying to download the national interest rates for some countries. When i use Datastream, it only gives me the currency return (while i need yield). Can someone please tell how to ...
1
vote
1answer
121 views

How to deal with different amount of td's in computing Sharpe Ratio

In calculating the Sharpe Ratio, should I take into account the days were I have 0 return due to non-trading day? Another user posted a similar question but this was related to trading days with no ...
11
votes
5answers
2k views

Should Sharpe ratio be computed using log returns or relative returns?

I am trying to reconcile some research with some published values of 'Sharpe ratio', and would like to know the 'standard' method for computing the same: Based on daily returns? Monthly? Weekly? ...
17
votes
2answers
622 views

How do you correct Max Draw-Down for auto-correlation?

When returns are auto-correlated, calculating a Sharpe ratio := $\frac {mean(x)}{\sqrt{var(x)}}$, (where $x$ are the returns) is complicated, but basically solved (see, e.g. Lo (2005)). Without the ...