Sharpe ratio
Sharpe ratio = (Rp - Rf) / sigma_p
Evaluating an entire portfolio, because it measures total risk and therefore penalises a portfolio for being undiversified.
- Rp
- Portfolio return over the period
- Rf
- Risk-free rate
- sigma_p
- Standard deviation of the portfolio's return, that is total risk
Treynor ratio
Treynor ratio = (Rp - Rf) / beta_p
Evaluating a security or portfolio for possible inclusion into an existing portfolio, where specific risk will be diversified away and only systematic risk matters.
- beta_p
- Portfolio beta, measuring systematic risk only
Jensen's alpha
alpha_p = Rp - [ Rf + beta_p (E(RM) - Rf) ]
= actual return - CAPM risk-adjusted predicted return
To say by how much a portfolio beat the market after adjusting for the risk it took. Build the CAPM prediction first; subtracting the market return instead is the standard error.
- E(RM)
- Expected or realised market return
- E(RM) - Rf
- Market risk premium
NPS withdrawal at 60
Maximum tax-free lump sum = 60% of corpus
Minimum annuity purchase = 40% of corpus
Equity cap in auto choice = 75%
Any NPS numerical. The 60% is a maximum and the 40% a minimum, so a subscriber may annuitise more but never less.
- corpus
- Accumulated value of the Tier I account at retirement