Modeling Maximum drawdown Records with Piecewise Deterministic Markov Processe in Capital Markets

Rolando Rubilar-Torrealba, Lisandro Fermin and Soledad Torres

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Abstract: We propose to model the records of the maximum Drawdown in capital markets by means a Piecewise Deterministic Markov Process (PDMP). We derive statistical results such as the mean and variance that describes the sequence of maximum Drawdown records. In addition, we developed a simulation study and techniques for estimating the parameters governing the stochastic process, using a practical example in the capital market to illustrate the procedure.

Date: 2025-03
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