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I am trying to compute a Sharpe ratio for a portfolio spanning over 20 years. I have daily data for the portfolio, as well as the yield of CH10Yr (10 year bond in Switzerland, downloaded from Thomson Reuters).

The latter looks like this :

enter image description here

If I want to compute the risk free rate for, say 2016, do I compute the average yield of 2016 and then divide by 252 (since it is daily data)? Or do I have to divide by 10, because it's the 10 year bond? And then for the Sharpe ratio, is it correct to take out the above-computed daily risk free rate from the portfolio daily return (and then divide it by std)?

Thanks for the help.

PS: I'm relatively new, if something is unclear, please tell me. I will do my best to clarify it.

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If you want the representing interest rate for 2016, you simply calculate the average of the values from the corresponding year. The result is your interest rate per annum. There is no need to divide it by 10, since the notation for CH10 bonds is also per year and not per every 10 year.

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