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#1




CDEF Task 2 Sharpe Ratio
Has anyone passed FA using the Sharpe Ratio as a risk/reward requirement? My risk/reward requirement was to have CTE(90)<X, Std Dev<X, and Sharpe Ratio maximized. I DNMMR'd with Tasks 2 & 5 needing the most work. I'm contemplating getting rid of Sharpe Ratio now. Although, I completely agree that it's a real risk/reward metric, I really don't know how to improve Task 2.

#2




The Sharpe Ratio (especially if you mentioned it by name) measures rates of return in the numerator. That isn't exactly appropriate given the model used. I modified the numerator appropriately. See the long Task 2 thread for details.
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#3




i agreed. Sharpe ratio is not very appropriate for this task, and also, pay attention that the return we are talking about here is to max the investment return, which means minimized the mean or max or min, so if you are using sharpe ratio, be careful with the direction here. since you want both the cost and the risk minimized in this case. risk/return matric is a must, but it doesnt have to be one metric shows both, it could be "minimize the cost while keeping the risk at ____ level". so you just need to explain what you use to measure risk and ruturn, and why you set the risk limit at this level.

#9




I'm probably in the minority in thinking what you did was fine. I'm guessing there is something lacking in your writeup and justification of it.
I didn't use Sharpe ratio though.
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#10




Hmm, you kind of have to use Sharpe Ratio with other things, no? So I used Sharpe Ratio to select one investment strategy, because setting the requirements to CTE<X and Std Dev<Y will give me multiple investment options. In this case, the maximum Sharpe Ratio would narrow the possibilities to 1.

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