Maximum Drawdown
The largest peak-to-trough percentage loss over a period, showing the worst pain a portfolio went through.
Category: Risk Measures
What is Maximum Drawdown?
Maximum drawdown is computed as the largest gap between a previous high water mark and a subsequent low. Recovery time is often reported alongside.
Formula
MDD = \min_t \frac{V_t - \max_{s \le t} V_s}{\max_{s \le t} V_s}