Maximum drawdown can serve as an alternative to the commonly used Value-at-Risk. Portfolio optimization using the drawdown is considered in Chekhlov, Uryasev and Zabarkin (2005). Analytical results linking the maximum drawdown to the mean return appeared in the paper of Magdon-Ismail and Atiya (2004). A drawdown refers to how much an investment or trading account is down from the peak before it recovers back to the peak. Drawdowns are typically quoted as a percentage, but dollar terms may also. Drawdown Date means, in relation to each Advance, any date, being a Banking Day falling during the Drawdown Period for such Advance, on which the relevant Advance is, or is to be, made available. Drawdown is the drop in the level of water in a well when water is being pumped. Drawdown is usually measured in feet or meters. Why should I measure drawdown? One of the most important reasons for measuring drawdown is to make sure that your source is adequate and not being depleted. What is a Maximum Drawdown? A maximum drawdown is the maximum range (move) between a peak and a trough of a portfolio. It is measured as a percentage or as a dollar amount in the case of trades/value. Investors use maximum drawdown (MDD) as an essential metric to evaluate the downside risk associated with a particular investment over a period.
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Drawdown.org
Drawdown
Drawdown
2. The gradual decline in the price of a security or other investment between its high and low over a given period. See also: Bear market.
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