About this question
Medium · risk_management · Quant Researcher interview question · sharpe_ratio, cornish_fisher, risk_adjustment, higher_moments, performance_measurement
The classical Sharpe ratio assumes normally distributed returns, which can be misleading for strategies exhibiting skewness or fat tails. The Modified Sharpe Ratio addresses this by using the Cornish-Fisher expansion to adjust the VaR denominator for higher moments (skewness and kurtosis), providing a more realistic risk-adjusted performance metric for non-normal return distributions in quantitative finance. Task Implement modified_sharpe_ratio(returns: list, risk_free_rate: float, confidence: