Definition for "Sharpe Ratio" in the Quantum Dictionary

- Social Sciences -

Finance & Accounting Dictionary

A markets and valuation concept defining how assets are priced and assessed using cash flows, risk measures, or relative benchmarks. It governs estimation of value, required return, and sensitivity to rate or spread changes across asset classes. It does not guarantee accuracy and depends on input quality, market liquidity, and the suitability of benchmarks and assumptions.

Social Sciences Dictionary

A risk‑adjusted performance measure equal to an asset or portfolio's average excess return over a chosen risk‑free rate divided by the standard deviation of its returns over the same measurement period: Sharpe Ratio = (Rp − Rf) / σp. It evaluates return per unit of total (symmetric) volatility under the chosen return and period conventions.