Foundations of risk management. quiz 1

kunalchitnis184
Posts: 1
Joined: Thu Sep 13, 2012 8:19 pm

Foundations of risk management. quiz 1

Postby kunalchitnis184 » Thu Sep 13, 2012 8:39 pm

Q1.an analyst has compiled the following information: sortino ratio 0.82, beta 1.15,expected return 12.2%, standard deviation 16.4%,Benchmark return 11.9%, Risk free rate:4.75%. Calculate the semi standard deviation.

the formula given in the solution is S.R=Avg Portfolio Returns-Risk free rate/SSD
according to this formula ans is 9.09%
but,
the formula for sortino ratio in pristine notes and schweser is given as SR=diff between portfolio returns- Minimum accepted returns(benchmark returns) / SSD
hence,
0.8=12.2-11.9/ssd
therefore SSD=0.30/0.82= 0.367 ~4%
which is the correct method to solve such type of problems?

regards

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shreyas
Finance Junkie
Posts: 83
Joined: Thu Jul 19, 2012 6:49 pm

Re: Foundations of risk management. quiz 1

Postby shreyas » Sat Sep 15, 2012 12:25 pm

The solution is incorrect and thanks for making a note of it. The formula to be used is as provided in the Pristine notes.


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