A1568
Title: Ups and drawdowns
Authors: Tommaso Proietti - University of Roma Tor Vergata (Italy) [presenting]
Abstract: The drawdown measures the potential loss of a financial asset associated with a deviation of current value from its local historical maximum. It is used to provide measures of market risk, to construct risk-adjusted measures of the performance of a portfolio, and for portfolio construction. The aim is to characterize the time series properties of the drawdown process and those of related processes, such as the drawup, the range between historical maxima and minima, and the duration of a drawdown. This is achieved by considering the returns distribution and the measurement process's nature. The latter is such that the time lag from the current maximum is a first-order Markov chain, which is homogeneous and ergodic under unrestrictive assumptions on the returns process. Time series prediction of future drawdowns and robust estimation in the presence of noise is finally considered.
