Investment Jargon: Drawdown Risk Measure​

Drawdown Risk Measure​

This risk measure looks back over some period of time, often a year, and measures the largest peak-to-trough fall of an asset’s price. For example if a share reached a price of £100 over the last year but subsequently fell to £50 on bad news its drawdown would be 50%. This is a very pessimistic risk measure because it always focusses on the worst event whereas volatility looks at typical or average price movements.​ See our comparison of risk measures in What is the best way to measure risk?.