Discounted2Zero
New Member
Hello
I have a question regarding the Sortino Ratio and a Monte-Carlo (MC) simulation I am currently calculating.
A quick explanation of my simulation setup: In each MC run, I am simulation 250 days on 1000 different paths with the same portfolio strategy. Each path has a specific distribution. Each path is independent from each other. I am conducting up to 20 different runs, on the one side for a changing trading filter and on the other side for a increasing investment percentage in a risky asset.
My question is, how do I handle the 1000 path in the caculation of the Sortino Ratio. I want to create a graphical surface that show how the Sortino Ratio changes (z axis) along increasing trading filter (x axis) and investment percentage (y axis). In my understanding, I have to calculate the Sortino Ratio first on each of the 1000 paths first, then average the results across the 1000 paths to get a cummulative Sortino Ratio, that then can be compared to other trading filter and investment percentage levels. Is this proceeding correct?
Best regards
I have a question regarding the Sortino Ratio and a Monte-Carlo (MC) simulation I am currently calculating.
A quick explanation of my simulation setup: In each MC run, I am simulation 250 days on 1000 different paths with the same portfolio strategy. Each path has a specific distribution. Each path is independent from each other. I am conducting up to 20 different runs, on the one side for a changing trading filter and on the other side for a increasing investment percentage in a risky asset.
My question is, how do I handle the 1000 path in the caculation of the Sortino Ratio. I want to create a graphical surface that show how the Sortino Ratio changes (z axis) along increasing trading filter (x axis) and investment percentage (y axis). In my understanding, I have to calculate the Sortino Ratio first on each of the 1000 paths first, then average the results across the 1000 paths to get a cummulative Sortino Ratio, that then can be compared to other trading filter and investment percentage levels. Is this proceeding correct?
Best regards
