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Annualized return divided by the absolute value of maximum drawdown.
Annualized return divided by the absolute value of maximum drawdown.
Developed by Terry Young, the Calmar Ratio measures risk-adjusted return by comparing a strategy's compound annual return to its worst peak-to-trough drawdown. It emphasizes capital preservation over absolute return volatility, making it useful for evaluating trend-following and managed-futures strategies.
Higher values indicate better drawdown-adjusted performance.
Common alternative to Sharpe for strategies with non-normal return distributions.
A Calmar ratio below 1.0 is generally considered poor for systematic strategies.
Portfolio optimization is the construction of an asset allocation that maximises risk-adjusted return subject to investor constraints. The classical framework is mean-variance optimisation (Markowitz, 1952); the modern framework is factor-based, with the portfolio constructed to express a target set of factor exposures and to harvest the corresponding risk premia.
Quantitative risk management is the measurement, monitoring, and control of financial risk across a firm. It spans market risk (the risk of losses from price movements), credit risk (the risk of a counterparty defaulting), operational risk (the risk of failures of internal processes, people, and systems), and regulatory risk (the risk of failing to comply with capital and reporting requirements).