Max Drawdown

In by OptionStack

The maximum drawdown (MDD) is the max loss from a peak to trough of the portfolio, before a new peak is attained.  It includes both Realized Profit / Loss and Unrealized Profit / Loss. Maximum drawdown is an indicator of downside risk over a specified time period.

The formula for maximum drawdown is:
MDD = (Trough Value – Peak Value) / Peak Value

drawdown

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