Risk glossary
Risk glossary
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Omega ratio
The omega ratio is a risk-adjusted performance measure calculated as the ratio of probability-weighted profits and losses.
It was developed in 2002 by William Shadwick and Con Keating to overcome the flaws of performance measures, such as the Sharpe ratio, that only consider the first two moments of the return distribution and do not allow for the performance to be measured against a threshold, or a benchmark. Omega captures all distribution moments and considers excess returns rather than absolute returns.
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