1.Maximum drawdown rate
Maximum drawdown rate: Pushes back at any historical point in the selected period, and the maximum return drawdown when the net product value reaches its lowest point. Maximum drawdown is used to describe the worst-case scenario that can occur after buying a product. Maximum drawdown is an important risk indicator that is more important than volatility for hedge funds and quantitative strategy trading.Maximum drawdown rate: Pushes back at any historical point in the selected period, and the maximum return drawdown when the net product value reaches its lowest point. Maximum drawdown is used to describe the worst-case scenario that can occur after buying a product. Maximum drawdown is an important risk indicator that is more important than volatility for hedge funds and quantitative strategy trading.
The above is a noun explanation for the maximum drawdown rate. With popular thinking in stock index futures fund product subscription can be understood as the following points.
1.Drawdown is used to measure the risk resistance of the private placement product.
Drawdown means that the maximum drawdown rate of the range of net product value falling from the highest point to the lowest point in a certain period of time, not necessarily the net value at the (highest point net worth – bottom net worth) / highest point, perhaps it will appear in one of the periods of the fall.
The formula can be expressed as follows: D for a day’s net worth, i for a day, j for a day after i, Di for day i’s net product value, Dj is a day after Di’s net worth drawdown is the maximum drawdown rate drewdown-max(Di-Dj)/Di, in fact, for each net worth drawdown rate, and then find out the largest. You can use program implementations.
(Initial net worth as of July 20, 2010; coinciding with the launch of QE2 global equity market rally in the U.S. in October 2010, the fund’s net worth rose to 1.8; and the domestic stock market fluctuated sharply, with a net worth of 0.98 percent as of April 25, 2011. This is the maximum drawdown rate to high-buy investors to indicate the significance)
2.Drawdown is used to describe the largest loss any investor may face
A fund product measured by historical absolute returns may have been held by its initial subscribers, but investors who subscribed at the best of times in the private equity fund did not necessarily make money and could even make a big loss. For example, a fund product was established in November 2008 the Initial Net Worth of 1700 points of the Shanghai Composite Index is 1, and when the Shanghai Composite Index rose to 3400 points in August 2009, the net worth reached 2.1. During the three-year decline in 2009-2012, the fund’s net worth fell to 1.2.
In terms of performance alone, the fund still generates 20 per cent returns for investors, but investors who subscribed in August 2009 lost 42.8 per cent, which is the fund’s maximum drawdown rate. Overall, focusing on the maximum drawdown rate for a private equity fund can help investors understand the fund’s risk control and the maximum losses they face.
Of course, while paying attention to the maximum drawdown rate, we should also pay attention to the moving slope of the average net value of the fund, such as qilong proposed to issue the “Qilong non-human stock index futures fund” historical data test for the maximum drawdown rate of 49%, 2 years return 1000% (10 times). Such funds are a full reflection of the hedge fund financial products of high risk, high-yield law. When investors hear the maximum drawdown rate of 49 per cent, it is almost booed, and when the yield curve is graphed, a 49 per cent drawdown is no longer an issue in the face of 10 times growth.