On the (Ab)Use of Omega?

Caporin, Massimiliano; Costola, Michele; Jannin, Gregory Mathieu; Maillet, Bertrand

doi:10.2139/ssrn.2559216

Cited by 4 publications

(5 citation statements)

References 89 publications

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“…26 According to Table 3, the ex ante conditional DARE-based cushioned portfolio is indeed always in the first half of the ranking of portfolios (determined ex post) according to Sharpe as mentioned earlier, but also according to Sortino and Kappa performance criteria (and in the first part of the ranking according to Omega). These performance measures are in line 27 with unconditional strategies associated to a multiple between 5 and 8.…”

Section: Conditional Versus Unconditional Portfolio Insurance Performsupporting

confidence: 56%

“…In Bertrand and Prigent, 2011). Caporin et al (2013b) show that some main performance measures can be written as:…”

Section: Case (Iii): Gap Risks With Both Multiple Changes and Rebalanmentioning

confidence: 99%

“…SeeBertrand and Prigent (2011) and the Appendix for a general definition of these measures 27. Except for the one-year TIPP where the ranking is inconclusive, due to a limited cushion (explained by the short investment horizon) and by a high leverage bias (since portfolios with high multiples are never so penalized by a long monetarization period).…”

mentioning

confidence: 99%

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A dynamic autoregressive expectile for time-invariant portfolio protection strategies

Hamidi¹,

Maillet

Prigent

2014

Journal of Economic Dynamics and Control

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Constant proportion portfolio insurance" (CPPI) is nowadays one of the most popular techniques for portfolio insurance strategies. It simply consists of reallocating the risky part of a portfolio with respect to market conditions, via a leverage parameter-called the multiple-guaranteeing a predetermined floor. We propose to introduce a conditional time-varying multiple as an alternative to the standard unconditional CPPI method, directly linked to actual risk management problematics. This ex ante approach for the conditional multiple aims to diversify the risk model associated, for example, with the expected shortfall (ES) or extreme risk measure estimations. First, we recall the portfolio insurance principles, and main properties of the CPPI strategy, including the time-invariant portfolio protection (TIPP) strategy, as introduced by Estep and Kritzman (1988). We emphasize the existence of an upper bound on the multiple, for example to hedge against sudden drops in the market. Then, we provide the main properties of the conditional multiples for well-known financial models including the discrete-time portfolio rebalancing case and Lévy processes to describe the risky asset dynamics. For this purpose, we precisely define and evaluate different gap risks, in both conditional and unconditional frameworks. As a by-product, the introduction of discrete or random time portfolio rebalancing allows us to determine and/or estimate the density of durations between rebalancements. Finally, from a more practical and statistical point of view due to trading restrictions, we present the class of Dynamic AutoRegressive Expectile (DARE) models for estimating the conditional multiple. This latter approach provides useful complementary information about the risk and performance associated with probabilistic approaches to the conditional multiple. D'une stratégie d'assurance de portefeuille dynamique fondée sur un modèle autorégressif de quantile Résumé « L'assurance de portefeuille à proportion constante" (CPPI en anglais) est aujourd'hui l'une des techniques les plus populaires pour les stratégies d'assurance de portefeuille. Elle consiste simplement à réallouer la partie risquée d'un portefeuille en fonction des conditions de marché qui déterminent le paramètre de l'effet de levier-appelé multiple-de façon à garantir un plancher prédéterminé de performance. Nous proposons dans cet article d'introduire un multiple variant dans le temps conditionnellement aux turbulences de marché, comme alternative à la méthode CPPI inconditionnelle classique, en utilisant une approche standard de gestion des risques. Le multiple est ainsi modélisé à partir de la moyenne prévue des pertes potentielles (ES), dans le cadre d'un modèle autorégressif dynamique de quantiles, qui présente, au final, l'avantage de conférer à la méthode d'assurance de portefeuille proposée, une certaine flexibilité adaptative de l'exposition au risque.

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Section: Conditional Versus Unconditional Portfolio Insurance Performsupporting

confidence: 56%

“…In Bertrand and Prigent, 2011). Caporin et al (2013b) show that some main performance measures can be written as:…”

Section: Case (Iii): Gap Risks With Both Multiple Changes and Rebalanmentioning

confidence: 99%

See 1 more Smart Citation

A dynamic autoregressive expectile for time-invariant portfolio protection strategies

Hamidi¹,

Maillet

Prigent

2014

Journal of Economic Dynamics and Control

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“…In contrast to meanvariance rule implied by Sharp ratio that does not work under first order dominance, Omega ratio can help detecting better performance under first order stochastic dominance. Caporin et al (2018) is a nice work on the overall developments on Omega ratio over the last two decades. They emphasized two flaws of Omega ratio.…”

Section: Related Workmentioning

confidence: 99%

Omega and Sharpe Ratio

2019

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“…A partir de las críticas realizadas a las medidas tradicionales de desempeño derivadas del análisis de media-varianza, en losúltimos años, académicos y profesionales de la industria han propuesto criterios alternativos que pueden adaptarse a entornos más complejos que los gaussianos (Caporin et al, 2018). El ratio Omega de Keating y Shadwick (2002) surge como uno de esos criterios alternativos para comparar el desempeño de diferentes oportunidades de inversión.…”

Section: Introductionunclassified

Consistencia del ratio Omega con el criterio de dominancia estocástica de segundo orden: evaluación del desempeño de ETF

Osorio¹

2018

ODE

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En este trabajo se usa el criterio de dominancia estocástica de segundo orden (en adelante ssd) y el ratio Omega para medir el desempeño de etf de renta variable del mercado norteamericano. Con base en el trabajo de Balder y Schweizer (2017) se ilustra la consistencia del ratio Omega con ssd en la evaluación del desempeño de etf. Los resultados presentados en este trabajo muestran que los etf clasificados como superiores para todos los inversionistas aversos al riesgo no saciados (ssd) son igualmente clasificados como superiores utilizando el ratio Omega. En los casos en los que el parámetro umbral K con el que se evalúan las estrategias genera inconsistencias en el ranking entre ssd y Omega, se observa que ssd captura en forma más completa el efecto en todos los momentos de la distribución en comparación a como lo hace Omega.

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On the (Ab)Use of Omega?

Cited by 4 publications

References 89 publications

A dynamic autoregressive expectile for time-invariant portfolio protection strategies

A dynamic autoregressive expectile for time-invariant portfolio protection strategies

Omega and Sharpe Ratio

Consistencia del ratio Omega con el criterio de dominancia estocástica de segundo orden: evaluación del desempeño de ETF

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