Skip main navigation

Cookies Notification

We use cookies on this site to enhance your user experience. By continuing to browse the site, you consent to the use of our cookies. Learn More
×

System Upgrade on Tue, May 28th, 2024 at 2am (EDT)

Existing users will be able to log into the site and access content. However, E-commerce and registration of new users may not be available for up to 12 hours.
For online purchase, please visit us again. Contact us at customercare@wspc.com for any enquiries.

SEARCH GUIDE  Download Search Tip PDF File

  • articleFree Access

    BOUNDED STRATEGIES FOR MAXIMIZING THE SHARPE RATIO

    Bernard et al. [(2019) Optimal strategies under omega ratio, European Journal of Operational Research 275 (2), 755–767] use convex ordering arguments to determine the bounded payoff for maximizing the omega ratio. However, it appears difficult to apply such reasoning to estimate the bounded payoff for maximizing the Sharpe ratio. As a proposed solution, this paper uses a Lagrange multiplier method to derive the bounded payoff for maximizing the Sharpe ratio. In contrast to the optimal strategy in Bernard & Vanduffel [(2014) Mean–variance optimal portfolios in the presence of a benchmark with applications to fraud detection, European Journal of Operational Research 234 (2), 469–480], the optimal strategy in this paper is bounded from below. It can protect investors from substantial losses when they invest in payoffs with a maximized Sharpe ratio.