The maximum drawdown (MDD) is the maximum decline in the value of the index, calculated as the difference between a peak to a trough of the index before a new peak is achieved.

The value of the index is based on total returns of the index.

It is an indicator of downside risk over a specific time period. It is usually quoted as a percentage of the peak value.

MDD_{t} = \frac{\text{Index Peak} - \text{Index Trough}}{\text{Index Peak}}

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