drawdown duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be. When is Brownian motion with drift, the expected behavior of the MDD as a function of time is known. If is represented as:Where is a standard Wiener process, then there are three possible outcomes based on the behavior of the drift : implies that the MDD grows logarithmically with time implies that the MDD grows as the square root of time implies that the MDD grows linearly with time Banking or other finance definitions Credit offered Where an amount of credit is offered, a drawdown against the line of credit results in a debt (which may have associated interest terms if the debt is not cleared according to an agreement.) Funds offered Where funds are made available, such as for a specific purpose, drawdowns occur if the funds – or a portion of the funds – are released when conditions are met. Optimization of drawdown A passing glance at the mathematical definition of drawdown suggests significant difficulty in using an optimization framework to minimize the quantity, subject to other constraints; this is due to the non-convex nature of the problem. However, there is a way to turn the drawdown minimization problem into a linear program. The authors start by proposing an auxiliary function , where is a vector of portfolio returns, that is defined by:They call this the conditional drawdown-at-risk (CDaR); this is a nod to conditional value-at-risk (CVaR), which may also be optimized using linear programming. There are two limiting cases to be aware of: is the average drawdown is the maximum drawdown See also Linear programming Risk measure Risk return ratio References Further reading Burghardt, G., Duncan, R. and L. Liu, "Understanding Drawdowns", working paper, Carr Futures (September 4), 2003 Eckholdt, H., "Risk Management: Using SAS to Model Portfolio Drawdown, Recovery and Value at Risk" (February), 2004. [What journal was this in?] Goldberg, L.R.