Hello everyone!
I’m struggling with the question: how pyfolio estimates risk free rate?
The plot_rolling_sharpe get as input the returns and create a plot of the rolling Sharpe Ratio. According to the Sharpe Ratio definition:
to calculate the Sharpe Ratio we need the risk free rate (e.g. from the benchmark). However, the plot_rolling_sharpe method don’t get any related input.
How Sharpe Rate is estimated? Is it used the average portfolio return as risk free rate?
Thank you very much!
Which file/folder are you looking at?
I’m looking at this file.
In particular to this piece of code:
plot_rolling_sharpe(returns=returns)
If my question is not clear I can try to rephrase.
Thanks!
You can go to the pyfolio-reloaded repository on github and find:
It looks like pyfolio assumes a risk free rate of zero.
(Many Quantopian functions use approximations unfortunately)
Thanks maartenb! I was suspecting it but I didn’t thought to go and look at pyfolio code documentation 
My fault 
However… this assumption really surprised me
