CaltechAUTHORS
  A Caltech Library Service

The maximum drawdown of the Brownian motion

Magdon-Ismail, Malik and Atiya, Amir and Pratap, Amrit and Abu-Mostafa, Yaser (2003) The maximum drawdown of the Brownian motion. In: IEEE International Conference on Computational Intelligence for Financial Engineering (CIFE '03). IEEE , Piscataway, NJ, pp. 243-247. ISBN 0780376544 http://resolver.caltech.edu/CaltechAUTHORS:MAGcife03

[img]
Preview
PDF
See Usage Policy.

241Kb

Use this Persistent URL to link to this item: http://resolver.caltech.edu/CaltechAUTHORS:MAGcife03

Abstract

The MDD is defined as the maximum loss incurred from peak to bottom during a specified period of time. It is often preferred over some of the other risk measures because of the tight relationship between large drawdowns and fund redemptions. Also, a large drawdown can even indicate the start of a deterioration of an otherwise successful trading system, for example due to a market regime switch. Overall, the MDD is a very important risk measure. To be able to use it more insightfully, its analytical properties have to be understood. As a step towards this direction, we have presented in this article some analytic results that we have developed. We hope more and more results will come out from the research community analyzing this important measure.


Item Type:Book Section
Additional Information:© Copyright 2003 IEEE. Reprinted with permission. Publication Date: 20-23 March 2003.
Subject Keywords:Brownian motion; econophysics; equity curve; fund redemptions; hedge funds; market regime switch; maximum drawdown; money managers; risk measure; trading system
Record Number:CaltechAUTHORS:MAGcife03
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:MAGcife03
Alternative URL:http://dx.doi.org/10.1109/CIFER.2003.1196267
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:10808
Collection:CaltechAUTHORS
Deposited By: Kristin Buxton
Deposited On:13 Jun 2008
Last Modified:26 Dec 2012 10:05

Repository Staff Only: item control page