RT Journal Article
SR Electronic
T1 Maximum Drawdowns of Hedge Funds with Serial Correlation
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 26
OP 38
DO 10.3905/jai.2006.627848
VO 8
IS 4
A1 Brian T. Hayes
YR 2006
UL https://pm-research.com/content/8/4/26.abstract
AB Maximum drawdown, the maximum peak-to-trough loss in net asset value (NAV), is a widely-used risk measure among alternative investment investors. Analogous to value-at-risk, a-percentile maximum-drawdown-at-risk (MDaR) is the maximum drawdown such that a fund recovers its peak NAV a-percent of the time before reaching it. In this article formulas for MDaR are derived, depending on a fund's mean return, volatility and serial correlation. The model-based MDaR are compared with historical MDaR of hedge fund indexes and simulated MDaR of an autoregressive model.TOPICS: Real assets/alternative investments/private equity, VAR and use of alternative risk measures of trading risk, statistical methods