Optimising omega

Optimising a portfolio's omega generally requires non-linear optimisation methods. Helmut Mausser, David Saunders and Luis Seco show that, under suitable conditions, a simple change of variables transforms the problem into a linear program that is much more readily solved

Performance measurement that accurately reflects the goals of fund investors and managers has long been a topic of active discussion. Most modern performance measures differ from classical ones (such as the Sharpe ratio) in two key ways: they reflect the market practice of assessing performance against a benchmark, and they account for the asymmetry in returns distributions by separately considering upside and downside.

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