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!