New Measures for Performance Evaluation

• 成果类型: Article
• 署名作者: Cherny, Alexander; Madan, Dilip
• 署名单位: University System of Maryland; University of Maryland College Park; Lomonosov Moscow State University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhn081
• 发表日期: 2009
• 页码: 2571
• 关键词: Incomplete markets; RISK; distributions; prices

摘要

This paper characterizes performance measures satisfying a set of proposed axioms. We develop four new measures consistent with the axioms and show that they improve on the economic properties of the Sharpe Ratio and the Gain-Loss Ratio. In our treatment, the performance measures, or the indexes of acceptability, are linked to positive expectations resulting from a stressed sampling of the cash-flow distribution. Theoretically, it is shown that the level of acceptability varies directly with the amount of stress tolerated. In an empirical application, the performance measures are applied to cash flows generated by writing options on the SPX and the FTSE. This exercise reveals that acceptability levels are U-shaped in the strike direction. (JEL G10, G13, G14)