Drawdown

Drawdown

A manager’s drawdown at time t is defined as follows:

  • Find the time s where the maximum of the manager’s cumulative return from the beginning of the analysis period to time t occurs.
  • The drawdown at time t is the manager’s cumulative return from time s to time t. Note that this cumulative return must be zero or a loss, because the manager’s high water mark from the beginning of the analysis period to time t occurs at s.
 
 

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