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Drawdown (DD)
QuantThe peak-to-trough decline of an equity curve over a specified window. The most-cited measure of risk in a systematic book.
Full definition
Maximum drawdown is the largest peak-to-trough percentage decline of a strategy's equity curve. Average drawdown and drawdown duration (time to recovery) are also standard. Drawdown is the risk measure most clients and recruiters actually care about. even a high-Sharpe strategy with a 60% max drawdown is unsellable. On this site, every quant project reports max DD, average DD, and recovery time at the OOS sample. Gate G9 of the G1 to G31 evaluation stack requires DD reporting on a transaction-cost-adjusted basis.
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