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Quantitative Finance · Glossaire

Qu'est-ce que « Drawdown limit » ?

Definition 28.3 Strategies I: Equities and Futures · Chapitre 28 — Running a Multi-Strategy Book

A drawdown limit stops or cuts a strategy’s risk when its loss from its previous peak exceeds a threshold, a share of its allocated capital; it trades the cost of stopping good strategies in bad luck against the cost of running dead ones too long.

False stops: the share of pods with a live edge that hit a drawdown limit within a year, for a single pod with a Sharpe ratio of 0.7 at 10% volatility (simulated paths) and for the synthetic firm’s pods, whose shared crashes add stops. Data: s1_multistrat.limits.
Figure 28.2. False stops: the share of pods with a live edge that hit a drawdown limit within a year, for a single pod with a Sharpe ratio of 0.7 at 10% volatility (simulated paths) and for the synthetic firm’s pods, whose shared crashes add stops. Data: s1_multistrat.limits.
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