What is Maximum Drawdown?
Maximum Drawdown The largest peak-to-trough percentage decline in portfolio value within a specified measurement period; a key downside-risk metric in performance reports, mandated under GIPS and routinely cited in client disclosures.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Maximum Drawdown” Used in Practice?
When the compliance team reviewed the composite, they flagged the 24% maximum drawdown during 2022 as exceeding the board-approved risk budget and triggering an explanatory note in the GIPS report.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Maximum Drawdown?
The largest peak-to-trough percentage decline in portfolio value within a specified measurement period; a key downside-risk metric in performance reports, mandated under GIPS and routinely cited in client disclosures.
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