Drawdown (economics)

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The drawdown is the measure of the decline from a historical peak in some variable (typically the cumulative profit or total open equity of a financial trading strategy). Somewhat more formally, if X ( t ) , t ≥ 0 {\textstyle X(t),\;t\geq 0} is a stochastic process with X ( 0 ) = 0 {\textstyle X(0)=0} , the drawdown at time T {\displaystyle T} , denoted D ( T ) {\textstyle D(T)} , is defined as: D ( T ) = max t ∈ ( 0 , T ) X ( t ) − X ( T...

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