Performance, verification & regulatory terms

Alpha (Finance) — Definition, Formula, and Jensen's Alpha

Alpha measures a portfolio's excess return relative to a benchmark predicted by CAPM. Definition, Jensen's alpha formula, worked example, and benchmark-choice limitations.

Beta (Finance) — Definition, Formula, and CAPM Context

Beta measures a portfolio's systematic exposure to a benchmark. Definition, regression formula, worked example, and why beta is benchmark- and window-dependent.

Bitcoin Timestamp — Definition and the Median-of-Eleven Rule

A Bitcoin block timestamp is the miner-supplied time embedded in a block header. Network rules constrain it to a tight window, making forgery impractical.

Calmar Ratio — Definition, Formula, and Drawdown Sensitivity

The Calmar ratio divides annualised return by maximum drawdown. Definition, formula, worked example, and why a single bad day can dominate the figure.

Canonical JSON — RFC 8785 and Why Key Order Matters

Canonical JSON (RFC 8785 / JCS) is a byte-stable serialization of JSON. Two semantically identical objects always produce the same bytes and the same hash.

Cash Flow (Finance) — Definition and Role in Performance Measurement

External cash flows are deposits and withdrawals that change a portfolio's funded base. Definition, examples, and why TWR is designed to neutralise them.

Compound Annual Growth Rate (CAGR) — Definition and Formula

CAGR is the constant annual rate that would grow a beginning value into an ending value over a given period. Definition, formula, when it applies, and when TWR is preferred.

Content Hash — Definition in NakedPnL's Verification

A content hash is the SHA-256 digest of a record's canonicalized contents. NakedPnL stores one per venue response so any later edit is detectable.

Copy Trading — Definition and Regulatory Characterization

Copy trading automatically mirrors one trader's orders into another's account. In several jurisdictions it is regulated as portfolio management. NakedPnL is not a copy-trading platform.

Fund Administrator — Definition and Role in Performance Verification

An independent fund administrator strikes NAV, books trades, and produces investor statements for a fund. Their role differs from NakedPnL's third-party publishing.

GIPS — Global Investment Performance Standards

GIPS is the CFA Institute's voluntary standard for calculating and presenting investment performance. NakedPnL uses the TWR methodology required by GIPS.

Hash Chain — Definition, How It Detects Tampering

A hash chain links each record to its predecessor via a cryptographic digest, so any retroactive edit changes every later hash and is detected.

Information Ratio — Definition, Formula, and Use by Allocators

Information ratio is excess return over a benchmark divided by tracking error. Definition, formula, worked example, and how institutional allocators use it.

Internal Rate of Return (IRR) — Definition and How It Differs from TWR

Internal rate of return is the discount rate that sets the net present value of a stream of cash flows to zero. Definition, formula, and comparison with TWR.

Maximum Drawdown — Definition, Formula, and Window Sensitivity

Maximum drawdown is the largest peak-to-trough decline in a portfolio's value. Definition, formula, worked example, and why extending history monotonically increases it.

Merkle Tree — Definition and Proof of Inclusion

A Merkle tree commits to many records with a single root hash and lets a verifier prove inclusion of any record in O(log N) hashes.

Net Asset Value (NAV) — Definition and Daily Computation

NAV is the total value of an account's assets minus liabilities. NakedPnL records one NAV snapshot per account per day as the basis for time-weighted returns.

OpenTimestamps — Trusted Timestamping Anchored to Bitcoin

OpenTimestamps is an open standard that anchors arbitrary data to a Bitcoin block via free calendar servers, producing independently re-verifiable proofs.

Prime Broker — Definition and Single Source of Truth

A prime broker centralises trade execution, custody, financing, and reporting for a hedge fund. The result: one canonical record of positions and cash.

R-Squared (Investing) — Definition, Formula, and Allocator Use

R-squared measures the share of a portfolio's return variance explained by a benchmark. Definition, formula, worked example, and how allocators interpret it.

SHA-256 — Definition and Properties

SHA-256 is a cryptographic hash function that maps any input to a 256-bit digest with strong preimage, second-preimage, and collision resistance.

Sharpe Ratio — Definition, Formula, and Why It Can Mislead

The Sharpe ratio is excess return per unit of total volatility. Definition, formula, worked example, and the lookback-window sensitivity that makes it gameable.

Sortino Ratio — Definition, Formula, and Limitations

The Sortino ratio is excess return divided by downside deviation. Definition, formula, worked example, and the threshold-choice problem that makes it gameable.

Time-Weighted Return (TWR) — Definition and Formula

Time-weighted return measures portfolio performance independent of investor cash flows. Definition, formula, worked example, and why TWR is the methodology required by GIPS.

Volatility (Finance) — Definition, Formula, and Limitations

Volatility is the standard deviation of periodic returns, usually annualised. Definition, formula, worked example, and why it is an incomplete measure of risk.