According to the safety-first criterion, the optimal portfolio is the one that has has the largest value for the SFRatio (mean − threshold) / standard deviation.
For Portfolio X, (5 − 3) / 3 = 0.67. For Portfolio Y, (14 – 3) / 20 = 0.55. For Portfolio Z, (19 – 3) / 28 = 0.57.
