Technical Measures for Professional InvestorsInterest Rates for Institutions For deposits larger than one million euro or equivalent, we will let you know if we can obtain higher rates than indicated Sharpe Ratio The Sharpe ratio of high yield deposits is much higher than any fund. The Sharpe ratio is an attempt to measure an investment's return in relation its risk. It is calculated as excess return above risk-free return divided by the return's volatility (standard deviation). Usual bank deposits have virtually no excess return over risk-free return, so their Sharpe ratio is virtually nil. Obviously the recommended high rate deposits on this site have excess returns. Also one would expect the standard deviation of that excess return to be very small. So one would expect huge Sharpe ratios. However the excess return over risk free rates is volatile due to changes in interest rates as central banks counter inflation or stimulate the economy. The volatility is approximately 1.5% The Sharpe ratio for our deposit plans are in the 4 - 12 range. This is substantially higher than funds, including absolute hedge funds. Use the following calculator to calculate the most recent 5-year Sharpe Ratio:-
Sortino Ratio It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target, or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. It is thus a measure of risk-adjusted returns that some people find to be more relevant than the Sharpe. is similar to the Sharpe ratio, except it uses downside deviation for the denominator instead of standard deviation, the use of which doesn't discriminate between up and down volatility. The Sortino ratio of our deposits is infinity becaus ethere is no downside volatility with deposits. Annual Equivalent Rate (AER) Also known as Annual Effective Rate or Annual Percentage Yield. The "AER" is a notional rate, commonly used in marketing of deposits. Its almost always quoted in adverts for savings accounts where interest is paid periodically during the year. In practice its a useless and misleading figure. It purports to "demonstrate" what your interest return would be if the interest was compounded and paid annually instead of periodically. In practice, one cannot roll up the periodic interest payments into the same deposit. (Maybe another deposit but it may be at different terms and rates). To determine the AER or Annual Percentage Yield of a deposit plan, use the following online calculator which also gives the maturity value of the deposit. For instance, a deposit with 15.2% p.a. monthly interest payments, has an AER of 16.3%.
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