YouTube T1-10 RAPMs: Treynor, Jensen's, Sharpe

Nicole Seaman

Director of FRM Operations
Staff member
Risk-adjusted performance measures (RAPMs) include Treynor and Jensen's, both of which are functions of the CAPM/SML, and the Sharpe ratio, which can be understood in the context of the CML.

David's XLS:

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Concerning the learning spreadsheet on RAPMs, the page called simulated information ratio (see the picture). I wonder why you choose the formula (rho)*Z(1) + sqrt(1-rho^2)*Z(2) to simulate return for Portfolio return? what is the logic behind this formula?Безымянный.jpg