Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339054 
Year of Publication: 
2025
Series/Report no.: 
Working Paper No. 2025:9
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
The maximum drawdown of a stochastic process is the largest peak-to-trough decline observed over a given horizon [0, T]. Using arguments from extreme value theory, we derive the limiting distribution of the maximum drawdown for a Brownian motion with positive drift as T Ç É. We show that, after suitable centering and scaling, the maximum drawdown converges in distribution to the Gumbel law.
Subjects: 
maximum drawdown
extreme value theory
asymptotic distribution
Document Type: 
Working Paper

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