What is “drawdown”?

The drawdown is a risk measure. It represents the loss that an investor would have suffered during a specific period, had he bought at the highest point and sold at the lowest. One can also measure the “current/ongoing drawdown” of an investment. It represents current loss of the investment since the last highest point. We show below the evolution of an asset’s price, …

Risk Letter 2 : At the in-efficiency frontier

          At the in-efficiency frontier, by Adina Grigoriu, member of the French Institute of Actuaries This second Active Asset Allocation « Risk Letter » looks at the delicate question of the choice of hypotheses, using the example of the efficient frontier. It touches upon the influence of an incorrect choice on asset allocation decisions and their …

Risk Letter 1 : Volatility as a risk measure

          Volatility is the most widespread measure of risk. The reason of its success comes from the fact that it is easy to understand (volatility, as anyone knows, represents the deviation of an asset return from its historical mean) and also easy to compute (one can calculate volatility with a built-­in formula in a spread sheet). …