New answers tagged risk
1
seems to me that the rate used depends on the corresponding strategy's grip on funding: that is to say, if the strategy is self-financing, rf=0 when calculating sharpe (in the sense that your costs of funds is zero in construction of the strategy); if it requires an outlay at t_0, an amount which is tied up throughout the time frame of the year, rf should be ...
2
The differences essentially boil down to liquidity and pricing discrepancies between the underlying and the futures of the underlying.
With futures you have to consider basis risk which you obviously do not face if you can trade in the underlying directly.
Additionally, you need to roll futures contracts before they expire, hence you are faced with roll ...
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