The safety-first ratio resembles the Sharpe ratio. However, instead of the risk-free rate, we use threshold level return.
When calculating the Sharpe ratio, we compare against the risk-free rate. With the safety-first ratio, we evaluate the portfolio performance against a minimum acceptable level.
Other related topics you might be interested to explore are Sharpe ratio and Expected Shortfall.
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Safety-first ratio is among the topics included in the Quantitative Methods module of the CFA Level 1 Curriculum.
