> The above definitions for Sharpe ratio are not quite correct. The Sharpe > ratio is a measure of excess return over the risk free rate (which is > usually taken as LIBOR) normalized by the volatility of the trading > algorithm. Furthermore, the numbers used in the numerator and denominator > are not absolute values, but percentages. The sharpe ratio adjusts for cost > because the return is expressed as a percentage and not as an absolute > number. > > Sharpe Ratio = (return - risk free rate)/volatility > return = your return as a percentage > risk free rate = London Interbank Offering Rate (LIBOR) - the interest rate > banks charge each other for lending > volatility = standard deviation of returns, as a percentage >
Right, as I noted above in this thread, PI is not the same as Sharpe's ratio. However, it measures the same thing, in essence, which is performance adjusted for risk. While it's not very meaningful by itself, PI is a good metric to go by when *comparing* multiple strategies over the same period of time. This is exactly what optimizer does, so PI is good for this purpose. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "JBookTrader" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/jbooktrader?hl=en -~----------~----~----~----~------~----~------~--~---
