Maximum Drawdown

Risk Magazine, Vol. 17, No. 10, pp. 99-102, October 2004

4 Pages Posted: 6 Jan 2006

See all articles by Malik Magdon-Ismail

Malik Magdon-Ismail

Assistant Professor of Computer Science

Amir F Atiya

Cairo University - Department of Computer Engineering

Abstract

The maximum loss from a market peak to a market nadir, commonly called the maximum drawdown (MDD), measures how sustained one's losses can be. Malik Magron-Ismail and Amir Atiya present analytical results relating the MDD to the mean return and Sharpe ratio. The MDD factors into many risk- adjusted measures of performance, such as the Calmar ratio. Magdon-Ismail and Atiya propose new scaling laws for these ratios, which facilitates the comparison of funds with track records of different length. They also discuss the portfolio implications of their results.

Keywords: maximum drawdown, sterling ratio,calmar ratio, asymptotic,

JEL Classification: G00

Suggested Citation

Magdon-Ismail, Malik and Atiya, Amir F, Maximum Drawdown. Risk Magazine, Vol. 17, No. 10, pp. 99-102, October 2004, Available at SSRN: https://ssrn.com/abstract=874069

Malik Magdon-Ismail (Contact Author)

Assistant Professor of Computer Science ( email )

Troy, NY 12180
United States
518-276-4857 (Phone)
518-276-4033 (Fax)

HOME PAGE: http://www.cs.rpi.edu/~magdon

Amir F Atiya

Cairo University - Department of Computer Engineering ( email )

Giza
Egypt, 11435
Egypt

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