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Annualzing the log of daily returns riddle
Joshua's point was that when you convert to log returns, you also need to convert your bounds to log returns. A 100% loss corresponds to a log loss of -infinity. Requiring a lower bound on the log return of -1 is equivalent to requiring a lower bound on the arithmetic return of -63.3%.
What are the risk factors in analysing strategies?
I'd be interested to hear how you'd improve this approach. It's pretty simplistic, but seems to show some efficacy to at least avoid the largest drawdowns.