Roy’s Criterion – Excel Template

Ned Krastev
Ned Krastev

If portfolio returns are normally distributed, Roy’s safety-first criterion translates into maximizing the safety-first ratio.

When we have a second portfolio, we would need to calculate its Safety-first ratio, then compare the results of the two portfolios given, and choose the one that has a more favorable ratio.

You should be able to tell which portfolio is preferable according to Roy’s safety-first criterion.

Other related topics you might be interested to explore are the Safety-first ratio and the Sharpe ratio.

This is an open-access Excel template in XLSX format that will be useful for anyone who wants to work as an Asset Manager or an Investment Professional.

You can now download the Excel template for free.

Roy’s criterion is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.