skfolio.measures.edar

skfolio.measures.edar(drawdowns, beta=0.95, sample_weight=None)

Compute the EDaR (entropic drawdown at risk).

The EDaR is a coherent risk measure which is an upper bound for the DaR and the CDaR, obtained from the Chernoff inequality. The EDaR can be represented by using the concept of relative entropy.

Parameters:

drawdownsndarray of shape (n_observations,)

Nonpositive drawdowns computed from the full return path, including dates with zero sample weight.

betafloat, default=0.95

The EDaR confidence level, between 0 and 1, inclusive.

sample_weightndarray of shape (n_observations,), optional

Relative observation weights. Must be finite and nonnegative. If None, equal weights are assumed. NaN drawdowns and their weights are excluded, and the remaining weights are rescaled to sum to one. The result is NaN if no observations or no positive weight remain.

Returns:

valuefloat

EDaR.