Page 60 - FINAL CFA I SLIDES JUNE 2019 DAY 3
P. 60
Session Unit 3:
LOS 10.m: Define shortfall risk, calculate
the safety-first ratio, and select an optimal 10. Common Probability Distributions
portfolio using Roy’s safety-first criterion,
p.229
Shortfall risk is the p that a portfolio value or return will fall below a particular (target) over a given time period.
Roy’s safety-first criterion – pick one which minimizes return p below
threshold level:
Given normally distribution of portfolio,
then RSFC is:
Remember (Sharpe Ratio, p150?)
Compare to z:
Observations?
