Questions tagged [maximum-drawdown]

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Global Maximum Drawdown and Maximum Drawdown Duration Implementation in Python

Following along with E.P. Chan's book, I'm attempting to calculate the maximum drawdown and the longest drawdown duration from cumulative portfolio returns. He codes it in MATLAB, but I wanted to try ...
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0answers
47 views

Why is Calmar ratio considered not to satisfy monotonicity?

We have the following definitions $\text{Gain-loss ratio} = \frac{E[X^+]}{|E[X^-]|}=\frac{E[X^+]}{-E[X^-]}=\frac{E[X]}{-E[X^-]}+1$; where $X$ are the returns, $E[X^+]$ is the expected gain, i.e. $E[X|...
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1answer
86 views

Which metric is most predictive: Mean, Sharpe, Calmar, …?

Suppose you have created a new trading algorithm: by varying the params of the algorithm, you get a large number of similar trading strategies (e.g. slightly different trigger thresholds, stop loss ...
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0answers
44 views

Cumulative return calculation with monthly return [closed]

I am working on calculate the cumulative return and I have monthly return rate as input. So I found formula of cumulative return: $$ \text{cumulative} = (1 + r_1) (1 + r_2)(1 + r_3) - 1 $$ so I used <...
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0answers
37 views

Portfolio of Assets with non-constant correlation - Maximum Drawdown

How could I calculate the maximum drawdown (given a specified confidence interval, ie. 99%) of a portfolio whose assets have non-constant (deterministic or stochastic) correlation? Is there a ...
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2answers
547 views

How to calculate the Maximum Drawdown for a portfolio in MATLAB?

I would like to verify my approach of calculating the Maximum Drawdown for a portfolio in MATLAB. I've got a vector of returns for the portfolio, to which I add 1 for every return. Afterwards I ...
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3answers
100 views

How to determine the optimal start capital for a strategy?

Suppose my strategy generates a stream of daily profits distributed like 𝒩[μ=1€, σ=10€]. Intuitively, if I trade with 10€ start capital: I could very well be ruined on the first day, if the first ...
1
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1answer
607 views

What is the Probability Distribution of Max-Drawdown?

How to obtain the probability distribution of Maximum Drawdown, starting from the probability distribution of Daily Returns? Here the details: Suppose I have a time serie of N=1000 daily returns. ...
2
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1answer
1k views

Reproduce findDrawdowns and maxDrawdown functions in R given return series

Is there any formula to calculate all drawdowns (and maximum drawdown) directly from return series? Or is it always necessary to convert the returns into implied "prices" first and then proceed with ...
8
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1answer
995 views

Expectation of maximum draw down in the Brownian motion case

Let $$ X_t = \mu t + \sigma B_t $$ be a linear Brownian motion with drift. Let $$ S_t = \max(X_u, u \le t) $$ denote the process of the running max, then the draw down is given by $$ DD_t = S_t - ...
1
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3answers
959 views

Sharpe Ratio vs Net Profit vs max drawdown

When evaluating the performance of an algorithm, what should hold more importance? Sharpe Ratio , Net profit or max drawdown? For instance, I have two algorithms one performs very good on Stocks with ...
4
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2answers
742 views

Comparison of Brownian Motion Expected Drawdown and simulated results

Can anyone tell me whether results as predicted by Brownian Motion for a given mean and std, match what you get by measuring actual drawdown from simulated results over a number of iterations?
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8answers
13k views

Fastest algorithm for calculating retrospective maximum drawdown

Simple question - what would be the fastest algorithm for calculating retrospective maximum drawdown ? I've found some interesting talks but I was wondering what people thought of this question here.