Convention difference in tseries.maxdrawdown (PR#8872)

Regarding the upwardly compatible comment, the dollar drawdown that
corresponds to the maximum fractional drawdown is not necessarily the
maximum dollar drawdown.

For example, in this situation the maximum fractional drawdown
is from 100 to 75 but the maximum dollar drawdown is from 200
to 160.

x <- c(1, 100, 75, 200, 160)

What type of drawdown to work with depends on the context. If working 
in percent is more appropriate, then you might use

maxdrawdown(log(x))$maxdrawdown

or if log returns are not appropriate then the following 
transformation provides the equivalent what was suggested

-(exp(-maxdrawdown(log(x))$maxdrawdown)-1)


Best regards
Adrian

maximumdrawdown(x) # function defined in post

$maximumdrawdown
[1] 0.25

$maxdrawdown
[1] 25

$from
[1] 2

$to
[1] 3

maxdrawdown(x) # function from tseries

$maxdrawdown
[1] 40

$from
[1] 4

$to
[1] 5

On 5/17/06, rproject at boonstra.org <rproject at boonstra.org> wrote:

Full_Name: Brian K. Boonstra
Version: 2.2.1
OS: WinXP, OSX
Submission from: (NULL) (63.172.178.137)


The maxdrawdown function in tseries defines the maximum drawdown in 
terms of
absolute dollars (or whatever units the input is in).  Industry 
convention is to
do this in percentage terms.  I have written the code below as
maximumdrawdown(), which retains backward compatibility with the 
current
version.  It has the flaw that it does not check for zero or 
negative values.

maximumdrawdown <- function (x)
{
   if (NCOL(x) > 1)
       stop("x is not a vector or univariate time series")
   if (any(is.na(x)))
       stop("NAs in x")
   cminx <- x/cummax(x)
   mdd <- min(cminx)
   to <- which(mdd == cminx)
   from <- double(NROW(to))
   for (i in 1:NROW(to)) {
     from[i] <- max( which(cminx[1:to[i]] == 1) )
     }
   return(list(maximumdrawdown = 1-mdd, maxdrawdown = 
(1-mdd)*x[from], from =
from, to = to))
}