Abstract
Maximum drawdown, the maximum peak-to-trough loss in net asset value (NAV), is a widely-used risk measure among alternative investment investors. Analogous to value-at-risk, a-percentile maximum-drawdown-at-risk (MDaR) is the maximum drawdown such that a fund recovers its peak NAV a-percent of the time before reaching it. In this article formulas for MDaR are derived, depending on a fund's mean return, volatility and serial correlation. The model-based MDaR are compared with historical MDaR of hedge fund indexes and simulated MDaR of an autoregressive model.
TOPICS: Real assets/alternative investments/private equity, VAR and use of alternative risk measures of trading risk, statistical methods
- © 2006 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Log in using your username and password
In this issue
