Steiner, Andreas, "Ambiguity in Calculating and Interpreting Maximum Drawdown," working paper (December), 2010.Atiya, "Maximum Drawdown", Risk Magazine (October), 2004. Kim, Daehwan, "Relevance of Maximum Drawdown in the Investment Fund Selection Problem when Utility is Nonadditive", working paper (July), 2010.T., "Maximum Drawdowns of Hedge Funds with Serial Correlation", Journal of Alternative Investments (vol 8, no 4) (Spring), pp. 26–38, 2006. Hoesli, "The Maximum Drawdown as a Risk Measure: The Role of Real Estate in the Optimal Portfolio Revisited", working paper (June 24), 2003. Zhou, "Optimal Investment Strategies for Controlling Drawdowns", Mathematical Finance 3, pp. 241–276, 1993. Mahmoud, "On a Convex Measure of Drawdown Risk", working paper, Center for Risk Management Research, UC Berkeley, 2014. Eckholdt, H., "Risk Management: Using SAS to Model Portfolio Drawdown, Recovery and Value at Risk" (February), 2004.Liu, "Understanding Drawdowns", working paper, Carr Futures (September 4), 2003 International Journal of Theoretical and Applied Finance. "Drawdown Measure in Portfolio Optimization" (PDF). ^ Chekhlov, Alexei Uryasev, Stanislav Zabarankin, Michael (2005)."Portfolio Optimization with Drawdown Constraints" (PDF). ^ Chekhlov, Alexei Uryasev, Stanislav Zabarankin, Michael (2003). ![]() "On the Maximum Drawdown of a Brownian Motion" (PDF). Using the “MAX” function in Excel, the array will contain the portfolio value in the current period and the peak value to date.MDD ( T ) = max τ ∈ ( 0, T ) D ( τ ) = max τ ∈ ( 0, T ) is a vector of portfolio returns, that is defined by: Note: Ideally, the historical data of the portfolio value should be longer, but the exercise here is intended for illustrative purposes. The historical portfolio value data – wherein the value of the portfolio value is based on the end of each month – is as follows. Suppose a hedge fund is measuring its maximum drawdown from the start of 2006 to the end of 2008. The maximum drawdown formula is as follows. If calculating the maximum drawdown in Excel, ensure the formula is dynamic to capture each new peak and restart of the cycle, i.e.
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