Schweser p 187 SS 10 book 3 “Whereas the semivariance measure the dispersion of returns below a specified TARGET RATE, shortfall risk measures the probability that the actual returns will be less than the target return.” I thought I remembered that semivariance was called something else when the target return wasn’t the mean or is that downside deviation?
it only makes sense if by target rate they mean expected rate.
Secret sauce indicates that the quote above is incorrect if the target return is NOT the recent average return then it is downside deviation NOT semivariance.
florinpop Wrote: ------------------------------------------------------- > it only makes sense if by target rate they mean > expected rate. Ok. Thanks pop. That is what I thought too.
Another question - Is the only difference between shortfall risk and VAR the time frame (in context of bond risk measures)?
Downside deviation comes from Sortino ratio sortino=(Return port- Min return needed)/ downside deviation where downside deviation is the deviation of returns under the minimum return needed. honestly my head is so screwed right now that I don’t even know exactly what shortfall risk means - except that i think it’s the probability of not reaching a certain return
Shortfall risk - probability of assets not meeting liablities… Asset/liability mismatch - asset and liabilities react differently to certain risk factors…