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Modeling Maximum drawdown Records with Piecewise Deterministic Markov Processe in Capital Markets

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  • Rolando Rubilar-Torrealba
  • Lisandro Fermin
  • Soledad Torres

Abstract

We propose to model the records of the maximum Drawdown in capital markets by means a Piecewise Deterministic Markov Process (PDMP). We derive statistical results such as the mean and variance that describes the sequence of maximum Drawdown records. In addition, we developed a simulation study and techniques for estimating the parameters governing the stochastic process, using a practical example in the capital market to illustrate the procedure.

Suggested Citation

  • Rolando Rubilar-Torrealba & Lisandro Fermin & Soledad Torres, 2025. "Modeling Maximum drawdown Records with Piecewise Deterministic Markov Processe in Capital Markets," Papers 2503.23221, arXiv.org.
    • Handle: RePEc:arx:papers:2503.23221
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    File URL: http://arxiv.org/pdf/2503.23221
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