All language subtitles for 5. Drawdown function creation

I a run and welcome in this new with you.

In this video, we're going to compute the drawdown of our strategy.

The doorman is a very interesting metric because it will allow us to understand the maximum drawdown,

which is the maximum loss of best strategy over a period of time.

And this is allow you to understand if the strategy is risky according to your level of aversion.

So let's get started by creating a function which returns the drawdown.

First, we need to compute the cumulative return.

Of all series, so it can be computer using the cumulative system like what we're going to do actually

or using the cumulative product.

So then we need to compute their running Max.

Jeremy Max is very easy, for example, if you have this vector.

And you apply that running max function.

You will have this

vector in retail.

It means that.

For example, here the MAX number is one.

So the cumulative return is one at this index.

Then we pass to a maximum value of three.

Then we go into a maximum value of five.

But then we decrease the value.

We stay at a maximum value of five.

This five will be replaced only if in this picture there is a no higher than five.

So to do it, we are going to use the maximum accumulate function from Mumbai to.

And now we can compute the drawdown, which is.

The cumulative return dividing by the run in Max minus one.

And now we can use this function to create or draw down.

So, for example.

If I put region Siri into the function and a print this.

Here we can see that we have a little issue in our code.

Which is here.

We want maximum and not running.

Sorry.

So now we can see the drawdown of our strategy in the next video, we're going to see how to create

a graph to highlight much better the drawdown of the strategy and how to compute the maximum drawdown

of a strategy.