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On the maximization of financial performance measures within mixture models

Abstract : We introduce mixtures of probability distributions to model empirical distributions of financial asset returns. In this framework, we examine the problem of maximizing performance measures. For this purpose, we consider a large class of reward/risk ratios such as the Kappa measures and in particular the Omega ratio. This latter measure is associated to a downside risk measure based on a put component. All these measures can take account of the asymmetry of the probability distribution, which is important when dealing with mixture of distributions. We examine first a fundamental example: the ranking and maximization of Gaussian mixture distributions, according to the Omega performance measure. Then we provide a general result for the maximization of mixture distributions with respect to a very large family of performance measures, including Kappa measures.
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Contributor : Rania Hentati Kaffel Connect in order to contact the contributor
Submitted on : Saturday, July 16, 2011 - 1:33:17 PM
Last modification on : Wednesday, October 5, 2022 - 11:12:07 AM



Rania Hentati, Jean-Luc Prigent. On the maximization of financial performance measures within mixture models. Statistics and Decisions, 2011, 28 (1), pp.63-80. ⟨10.1524/stnd.2011.1083⟩. ⟨hal-00608960⟩



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