R: Maximum Drawdown or Maximum Loss

maxdrawdown {tseries}

R Documentation

Maximum Drawdown or Maximum Loss

Description

This function computes the maximum drawdown or maximum loss of the univariate time series (or vector) x.

Usage

maxdrawdown(x)

Arguments

`x`	a numeric vector or univariate time series.

Details

The max drawdown or max loss statistic is defined as the maximum value drop after one of the peaks of x. For financial instruments the max drawdown represents the worst investment loss for a buy-and-hold strategy invested in x.

Value

A list containing the following three components:

`maxdrawdown`	double representing the max drawdown or max loss statistic.
`from`	the index (or vector of indices) where the max drawdown period starts.
`to`	the index (or vector of indices) where the max drawdown period ends.

Author(s)

A. Trapletti

Examples

# Toy example
x <- c(1:10, 9:7, 8:14, 13:8, 9:20)
mdd <- maxdrawdown(x)
mdd

plot(x)
segments(mdd$from, x[mdd$from], mdd$to, x[mdd$from], col="grey")
segments(mdd$from, x[mdd$to], mdd$to, x[mdd$to], col="grey")
mid <- (mdd$from + mdd$to)/2
arrows(mid, x[mdd$from], mid, x[mdd$to], col="red", length = 0.16)

# Realistic example
data(EuStockMarkets)
dax <- log(EuStockMarkets[,"DAX"])
mdd <- maxdrawdown(dax)
mdd

plot(dax)
segments(time(dax)[mdd$from], dax[mdd$from],
         time(dax)[mdd$to], dax[mdd$from], col="grey")
segments(time(dax)[mdd$from], dax[mdd$to],
         time(dax)[mdd$to], dax[mdd$to], col="grey")
mid <- time(dax)[(mdd$from + mdd$to)/2]
arrows(mid, dax[mdd$from], mid, dax[mdd$to], col="red", length = 0.16)

[Package tseries version 0.10-0 Index]