Risk Magazine, Vol. 17, No. 10, pp. 99-102, October 2004
4 Pages Posted: 6 Jan 2006
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: Suggested Citation
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