Glossary entry (derived from question below)
Feb 21, 2005 04:09
19 yrs ago
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English term
drawdown
English to Norwegian
Bus/Financial
Finance (general)
Maximum drawdown
Uninterrupted drawdown
From info on Hedge Fund
Uninterrupted drawdown
From info on Hedge Fund
Proposed translations
(Norwegian)
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The maximum drawdown can be loosely defined as the largest drop from a peak to a bottom in a certain time period.
Maximum drawdown captures a path-dependant feature of a time series which is not represented in the histogram of the return time series.
Given a time series with N log returns r(t) over t = 1 to T, we can define...
Maximum Loss
= min [r(1), r(1)+r(2), r(1)+r(2)+r(3), ..., r(1)+...+r(N)]
= min [ sum [r(i)] ]
t=0..N i=1..t
In words: The minimum cummulated return from the beginning in a certain time period.
Drawdown
= max [ sum[r(t)] ] - r(t)
t = 0..T
Maximum Drawdown
= min [r(1), r(1)+r(2), r(1)+r(2)+r(3), ..., r(1)+...+r(N),
r(2), r(2)+r(3), r(2)+r(3)+r(4), ..., r(2)+...+r(N), ..., r(N)]
= min [ sum [r(j)] ]
i=1..t, t=1..N j=i..t
In words: The minimum cummulated return from any beginning points over a certain time period.
= max [ Drawdown(t) ]
t=0..T
...the last formula yields the end-point of the maximum
drawdown period. The starting point is found at the
last time point Drawdown(t) was equal to zero.
Maximum drawdown is always smaller than or equal to the difference between maximum loss and maximum gain.
Maximum loss & gain are the global extreme values, maximum drawdown is a concept base on the local minimum of a return time series.
Maximum drawdown is often used when not enough observations are available to calculate volatility measures (like for example standard deviation).
Maximum drawdown is highly dependent on the time interval chosen (annual, monthly, daily and so on) as well as the observation period.
This is the maximum loss (compounded, not annualized) that the manager ever incurred during any subperiod of the entire time period.
The maximum drawdown can be loosely defined as the largest drop from a peak to a bottom in a certain time period.
Maximum drawdown captures a path-dependant feature of a time series which is not represented in the histogram of the return time series.
Given a time series with N log returns r(t) over t = 1 to T, we can define...
Maximum Loss
= min [r(1), r(1)+r(2), r(1)+r(2)+r(3), ..., r(1)+...+r(N)]
= min [ sum [r(i)] ]
t=0..N i=1..t
In words: The minimum cummulated return from the beginning in a certain time period.
Drawdown
= max [ sum[r(t)] ] - r(t)
t = 0..T
Maximum Drawdown
= min [r(1), r(1)+r(2), r(1)+r(2)+r(3), ..., r(1)+...+r(N),
r(2), r(2)+r(3), r(2)+r(3)+r(4), ..., r(2)+...+r(N), ..., r(N)]
= min [ sum [r(j)] ]
i=1..t, t=1..N j=i..t
In words: The minimum cummulated return from any beginning points over a certain time period.
= max [ Drawdown(t) ]
t=0..T
...the last formula yields the end-point of the maximum
drawdown period. The starting point is found at the
last time point Drawdown(t) was equal to zero.
Maximum drawdown is always smaller than or equal to the difference between maximum loss and maximum gain.
Maximum loss & gain are the global extreme values, maximum drawdown is a concept base on the local minimum of a return time series.
Maximum drawdown is often used when not enough observations are available to calculate volatility measures (like for example standard deviation).
Maximum drawdown is highly dependent on the time interval chosen (annual, monthly, daily and so on) as well as the observation period.
This is the maximum loss (compounded, not annualized) that the manager ever incurred during any subperiod of the entire time period.
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