TY - JOUR
T1 - Probability distribution of drawdowns in risky investments
AU - Maslov, Sergei
AU - Zhang, Yi Cheng
N1 - Funding Information:
The work at Brookhaven National Laboratory was supported by the US Department of Energy Division of Material Science, under contract DE-AC02-98CH10886. One of us (S.M.) thanks the Institut de Physique Théorique, Université de Fribourg, for the hospitality and financial support during the visit, when this work was performed.
PY - 1999
Y1 - 1999
N2 - We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a general power law. In particular, if the risk exposure is Kelly-optimal, the exponent of this power law has the borderline value of 2, i.e. the average drawdown is just about to diverge.
AB - We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a general power law. In particular, if the risk exposure is Kelly-optimal, the exponent of this power law has the borderline value of 2, i.e. the average drawdown is just about to diverge.
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U2 - 10.1016/S0378-4371(98)00416-6
DO - 10.1016/S0378-4371(98)00416-6
M3 - Article
AN - SCOPUS:0032777343
SN - 0378-4371
VL - 262
SP - 232
EP - 241
JO - Physica A: Statistical Mechanics and its Applications
JF - Physica A: Statistical Mechanics and its Applications
IS - 1-2
ER -