For funds or account assets, retracement refers to the extent of decline within a period of time. Of course, the smaller the number, the better. Some institutions use negative numbers to indicate retracement, while others use positive numbers to indicate retracement. Generally speaking, the closer this number is to 0, the better.
The maximum retracement rate refers to the maximum retracement of the yield when the net value of the product reaches its lowest point at any historical point in the selected period. Maximum drawdown is used to describe the worst possible situation that may occur after buying a product. Maximum drawdown is an important risk indicator, even more important than volatility for hedge funds and quantitative strategy trading.
Specific performance:
The above is a noun explanation of the maximum retracement rate. Using popular thinking, the following points can be understood in the subscription of stock index futures fund products.
1. Drawdown is used to measure the risk resistance of the private equity product.
The meaning of retracement refers to the extent to which the product's net value falls from the highest point to the lowest point within a certain period of time
The maximum retracement rate is not necessarily (the highest point net value -Net value at the lowest point)/Net value at the highest point, maybe it will fall back in a certain period.
The formula can be expressed as follows:
D is the net value of a certain day, i is a certain day, j is the day after i, Di is the net value of the product on the i-th day, Dj is then It is the net value on a certain day after Di
drawdown is the maximum retracement rate
drawdown=max ((Di-Dj)/Di), which is actually the retracement rate for each net value Evaluate and find the largest. This can be done using a program.
2. Drawdown is used to describe the maximum loss that any investor may face
If a fund product is measured by historical absolute returns, its initial subscribers may have been holding it for It makes money, but investors who subscribed when the private equity fund performed best may not necessarily make money, and may even suffer huge losses.
For example: a fund product was established in November 2008. The initial net value of the Shanghai Composite Index was 1,700 points. When the Shanghai Composite Index rose to 3,400 points in August 2009, the net value reached 2.1, bringing investors 110 % return. During the three consecutive years of decline from 2009 to 2012, the fund's net value dropped to 1.2. Judging from performance alone, the fund still creates 20% returns for investors, but investors who subscribed in August 2009 would have suffered a loss of 42.8%, and this 42.8% is the maximum drawdown rate of the fund.
In general, paying attention to the maximum drawdown rate of a private equity fund can help investors understand the fund's risk control capabilities and know the maximum loss they face. Of course, while paying attention to the maximum retracement rate, you should also pay attention to the moving slope of the average net value of the fund.
When investors heard that the maximum retracement rate was 49%, there was almost a boo; and when the yield curve was graphed, facing a 10-fold increase, the 49% retracement was no longer question.