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Risks 2017, 5(2), 27; doi:10.3390/risks5020027

Risk Management under Omega Measure

Laboratoire de Recherche en Informatique, Université Paris-Sud, 91405 Orsay, France
Department of Mathematics and Statistics, McMaster University, 1280 Main Street West, Hamilton, ON L8S 4K1, Canada
Author to whom correspondence should be addressed.
Academic Editor: Annamaria Olivieri
Received: 10 January 2017 / Revised: 7 April 2017 / Accepted: 27 April 2017 / Published: 6 May 2017
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We prove that the Omega measure, which considers all moments when assessing portfolio performance, is equivalent to the widely used Sharpe ratio under jointly elliptic distributions of returns. Portfolio optimization of the Sharpe ratio is then explored, with an active-set algorithm presented for markets prohibiting short sales. When asymmetric returns are considered, we show that the Omega measure and Sharpe ratio lead to different optimal portfolios. View Full-Text
Keywords: risk management; portfolio optimization; Omega measure; Sharpe ratio; active-set algorithm; non-convex optimization risk management; portfolio optimization; Omega measure; Sharpe ratio; active-set algorithm; non-convex optimization

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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Metel, M.R.; A. Pirvu, T.; Wong, J. Risk Management under Omega Measure. Risks 2017, 5, 27.

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