Explain the Type of Risk Measured by Each of the Following

question 55

Essay

Explain the type of risk measured by each of the following measures. Also identify the factor in each formula that determines the type of risk that is being measured.
(a) Jensen's measure
(b) Sharpe's measure
(c) Treynor's measure

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Definitions:

Poisson Distribution

A statistical distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space, assuming that these events occur with a known constant mean rate and independently of the time since the last event.

Expected Cost

The forecasted cost of completing a project or producing a product, taking into account all known variables and potential risks.

Waiting-Line System

A model used to analyze the flow of customers, tasks, or items through a queue or waiting period, optimizing service efficiency.

M/M/1

A basic model in queueing theory representing a system with a single server, where arrivals and service times are both exponential (Markovian), and there is a single queue.