Financial economics
Maximum drawdown
The largest percentage fall from a peak to a subsequent trough over an observed period.
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Risk, returns and the way financial markets allocate resources.
What connects risk, value and markets?
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Financial economics
Arithmetic average return
The sum of periodic returns divided by the number of periods.
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Geometric average return
The constant periodic return that produces the same compounded growth as the actual returns.
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Diversification
Spreading exposure across different investments to reduce concentration risk.
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Real return
A return adjusted for changes in purchasing power.
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Risk premium
Extra expected return above a chosen lower-risk benchmark for bearing additional risk.
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Bond price and yield
For a fixed set of promised bond cash flows, a higher required yield implies a lower present price.
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Liquidity
The ability to buy or sell an asset promptly without a substantial price concession.
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