Reference Materials
Best/Worst Case Cumulative Value
The Best / Worst Case Cumulative Value is the best / worst case total portfolio value after T periods under a best / worst case scenario. The likelihood of obtaining a total portfolio value that is more extreme than the Best / Worst Case Cumulative Value (given the inputs) is approximately 2.5%.
where:
CCM = expected continuously compounded mean return
CCV = expected continuously compounded variance of return
E[R] = Portfolio Return
V = variance of portfolio
T = number of periods
Note: The "1.96" can be replaced with "2." The 1.96 represents 1.96 standard deviations, which corresponds to 95% of the distribution. The 2 represents 2 standard deviations, which corresponds to 95.4% of the standard deviation.