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drawdown

Norwegian translation: tap

GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW)
English term or phrase:drawdown
Norwegian translation:tap
Entered by: Tore Bjerkek

04:09 Feb 21, 2005
English to Norwegian translations [PRO]
Bus/Financial - Finance (general)
English term or phrase: drawdown
Maximum drawdown
Uninterrupted drawdown
From info on Hedge Fund
Helene Olsen Richards
United States
Local time: 14:15
tap
Explanation:
http://www.andreassteiner.net/performanceanalysis/?Risk_Meas...
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.
Selected response from:

Tore Bjerkek
Canada
Local time: 17:15
Grading comment
4 KudoZ points were awarded for this answer



Summary of answers provided
2 +1tap
Tore Bjerkek


  

Answers


8 mins   confidence: Answerer confidence 2/5Answerer confidence 2/5 peer agreement (net): +1
tap


Explanation:
http://www.andreassteiner.net/performanceanalysis/?Risk_Meas...
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.

Tore Bjerkek
Canada
Local time: 17:15
Specializes in field
Native speaker of: Native in NorwegianNorwegian
PRO pts in category: 47

Peer comments on this answer (and responses from the answerer)
agree  Mari Noller: tap passer nok bra
7 hrs
Login to enter a peer comment (or grade)



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