SEM217: Alex Papanicolaou, UC Berkeley: Minimum Conditional Expected Drawdown Portfolios

Tuesday, April 11th @ 11:00-1:00 PM (639 Evans Hall)

Minimum Conditional Expected Drawdown Portfolios

Alex Papanicolaou, UC Berkeley

Drawdown, and in particular maximum drawdown, is a widely used indicator of risk in the fund management industry. It is a vital metric for a levered investor who can get caught in a liquidity trap and forced to sell valuable positions if unable to secure funding after an abrupt market decline. Moreover, it is a pathwise risk measure in contrast to end-horizon risk diagnostics like volatility, Value-at-Risk, and Expected Shortfall, which are less significant conditioned on a large drawdown. In this talk, I will present ongoing work aimed at computations for Conditional Expected Drawdown, a recently developed extreme risk measure on maximum drawdown, look at risk-based asset allocation under CED and how it compares with other risk measures, CED risk attribution, and more.