/**
* Copyright (C) 2009 - present by OpenGamma Inc. and the OpenGamma group of companies
*
* Please see distribution for license.
*/
package com.opengamma.analytics.financial.riskreward;
/**
* The risk-adjusted performance ($RAP$) measure expresses the average return an
* asset or fund would have achieved if it had the same risk as the market.
* The risk measure used is the standard deviation.
* <p>
* It is defined as:
* $$
* \begin{eqnarray*}
* RAP_i = \frac{\sigma_M}{\sigma_i}(\mu_i - R_f) + R_f
* \end{eqnarray*}
* $$
* where $\sigma_M$ is the standard deviation of the market returns, $\sigma_i$
* is the standard deviation of the asset returns, $\mu_i$ is the asset return
* and $R_f$ is the risk-free return
*/
public class RiskAdjustedPerformanceCalculator {
/**
* Calculates the risk-adjusted performance
* @param assetReturn The return of the asset
* @param riskFreeReturn The risk-free return
* @param assetStandardDeviation The standard deviation of the asset returns
* @param marketStandardDeviation The standard deviation of the market returns
* @return The risk-adjusted performance
*/
public double calculate(final double assetReturn, final double riskFreeReturn, final double assetStandardDeviation, final double marketStandardDeviation) {
return (assetReturn - riskFreeReturn) * marketStandardDeviation / assetStandardDeviation + riskFreeReturn;
}
}