Capital Asset Pricing Model (CAPM) with Drawdown Measure

Michael Zabarankin, Konstantin Pavlikov, Stan Uryasev

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Resumé

The notion of drawdown is central to active portfolio management. Conditional Drawdown-at-Risk (CDaR) is defined as the average of a specified percentage of the largest drawdowns over an investment horizon and includes maximum and average drawdowns as particular cases. The necessary optimality conditions for a portfolio optimization problem with CDaR yield the capital asset pricing model (CAPM) stated in both single and multiple sample-path settings. The drawdown beta in the CAPM has a simple interpretation and is evaluated for hedge fund indices from the HFRX database in the single sample-path setting. Drawdown alpha is introduced similarly to the alpha in the classical CAPM and is evaluated for the same hedge fund indices. Both drawdown beta and drawdown alpha are used to prioritize hedge fund strategies and to identify instruments for hedging against market drawdowns.
OriginalsprogEngelsk
TidsskriftEuropean Journal of Operational Research
Vol/bind234
Udgave nummer2
Sider (fra-til)508-517
ISSN0377-2217
DOI
StatusUdgivet - 2014
Udgivet eksterntJa

Fingeraftryk

Capital Asset Pricing Model
Sample Path
Portfolio Management
Costs
Portfolio Optimization
Necessary Optimality Conditions
Hedging
Percentage
Horizon
Optimization Problem
Capital asset pricing model
Hedge funds

Citer dette

Zabarankin, Michael ; Pavlikov, Konstantin ; Uryasev, Stan. / Capital Asset Pricing Model (CAPM) with Drawdown Measure. I: European Journal of Operational Research. 2014 ; Bind 234, Nr. 2. s. 508-517.
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Capital Asset Pricing Model (CAPM) with Drawdown Measure. / Zabarankin, Michael; Pavlikov, Konstantin; Uryasev, Stan.

I: European Journal of Operational Research, Bind 234, Nr. 2, 2014, s. 508-517.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

TY - JOUR

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AU - Pavlikov, Konstantin

AU - Uryasev, Stan

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