finance.sharpe_ratio

Does the description disclose side effects, auth requirements, rate limits, or destructive behavior?

Annotations already establish that this is a read-only, idempotent, closed-world calculation, so the description adds useful extra context: it returns an error when standard deviation is zero, rounds results to eight decimal places, and warns against subtracting an annual risk-free rate directly from daily returns. It does not describe pagination or response shape, but for a pure calculator the behavioral disclosure is strong.

Agents need to know what a tool does to the world before calling it. Descriptions should go beyond structured annotations to explain consequences.

Is the description appropriately sized, front-loaded, and free of redundancy?

The formula is front-loaded, and every sentence contributes either a parameter rule, an edge case, or an important unit warning. There is no filler.

Shorter descriptions cost fewer tokens and are easier for agents to parse. Every sentence should earn its place.

Given the tool's complexity, does the description cover enough for an agent to succeed on first attempt?

Given the 0% schema description coverage and the presence of an output schema, the description is nearly complete: it covers the formula, all three parameters, unit consistency, annualization, zero-standard-deviation failure, and output precision. The main missing piece is explicit comparison with sibling ratio tools.

Complex tools with many parameters or behaviors need more documentation. Simple tools need less. This dimension scales expectations accordingly.

Does the description clarify parameter syntax, constraints, interactions, or defaults beyond what the schema provides?

Schema description coverage is 0%, so the description carries the full burden and does so well: it explains that returns is a list of period return strings requiring at least two values, that risk_free_rate is in the same period unit and defaults to 0, and that periods_per_year triggers sqrt(periods_per_year) annualization. It still leaves some ambiguity about whether return strings are decimals or percentages, so it is not perfect.

Input schemas describe structure but not intent. Descriptions should explain non-obvious parameter relationships and valid value ranges.

Does the description clearly state what the tool does and how it differs from similar tools?

The description states a specific verb and resource: it computes the Sharpe ratio and even supplies the exact formula. It is clearly distinct in meaning from generic calculators, but it does not explicitly differentiate itself from sibling tools such as finance.sortino_ratio.

Agents choose between tools based on descriptions. A clear purpose with a specific verb and resource helps agents select the right tool.

Does the description explain when to use this tool, when not to, or what alternatives exist?

The description gives practical usage constraints: returns must contain at least two period return strings, risk_free_rate must be in the same period unit, and annualization occurs when periods_per_year > 0. However, it never says when to choose this tool over alternatives like finance.sortino_ratio or the VaR tools, and it provides no explicit when-not guidance.

Agents often have multiple tools that could apply. Explicit usage guidance like "use X instead of Y when Z" prevents misuse.