Drawdowns and Rallies in a Finite Time-horizon

Hongzhong Zhang () and Olympia Hadjiliadis ()
Additional contact information
Hongzhong Zhang: C.U.N.Y.
Olympia Hadjiliadis: C.U.N.Y.

Methodology and Computing in Applied Probability, 2010, vol. 12, issue 2, 293-308

Abstract: Abstract In this work we derive the probability that a rally of a units precedes a drawdown of equal units in a random walk model and its continuous equivalent, a Brownian motion model in the presence of a finite time-horizon. A rally is defined as the difference of the present value of the holdings of an investor and its historical minimum, while the drawdown is defined as the difference of the historical maximum and its present value. We discuss applications of these results in finance and in particular risk management.

Keywords: Drawdown; Rally; Random walk; Brownian motion; Primary 60G40; Secondary 91A60 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://link.springer.com/10.1007/s11009-009-9139-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:metcap:v:12:y:2010:i:2:d:10.1007_s11009-009-9139-1

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/11009

DOI: 10.1007/s11009-009-9139-1

Access Statistics for this article

Methodology and Computing in Applied Probability is currently edited by Joseph Glaz

More articles in Methodology and Computing in Applied Probability from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().