Tractable Robust Drawdown Management

19 Pages Posted: 8 Sep 2016 Last revised: 21 Sep 2016

Date Written: September 6, 2016

Abstract

This paper studies the prior-free allocation framework of Chassang (2016) in continuous time, and proposes a simple analytical approximation of the optimal solution. Numerical analysis based on actual and simulated data demonstrates the robustness of the proxy strategy. The result of the paper makes the Chassang (2016) approach easily implementable for practical drawdown management.

Keywords: Maximum Drawdown, Robust Optimization, Prior Free, Dynamic Allocation, Risk Management

JEL Classification: C60, D81, G11

Suggested Citation

Medvedev, Alexey, Tractable Robust Drawdown Management (September 6, 2016). Available at SSRN: https://ssrn.com/abstract=2835569 or http://dx.doi.org/10.2139/ssrn.2835569

Alexey Medvedev (Contact Author)

Lombard Odier & Cie ( email )

Avenue des Morgines 6
Petit-Lancy
Switzerland

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