Drawdown Recovery Math

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Required gain to recover from a given drawdown. Highlights the asymmetry of losses.

Details

• category: Risk Management
• formula: Required Return = 1 / (1 - DD) - 1
• formula latex: R_{\text{recover}} = \dfrac{1}{1 - DD} - 1
• related terms: drawdown, loss-aversion, compound-return

Formula

Required Return = 1 / (1 - DD) - 1