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    risk

    Maximum Drawdown

    The largest peak-to-trough percentage loss over a period, showing the worst pain a portfolio went through.

    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}

    Related terms

    Conditional Drawdown-at-Risk (CDaR)Ulcer IndexCalmar Ratio

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