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Tail-risk on the drawdown distribution. Like CVaR, but for the path-dependent pain.
CDaR (Conditional Drawdown at Risk) is the average of the worst α% of drawdowns over a window. CDaR(5%) is the mean drawdown across the worst 5% of all drawdown observations. Conceptually identical to CVaR but applied to path-dependent drawdowns rather than single-period returns.
CDaR_α = E[DD | DD ≥ VaR_α(DD)]CDaRα = E[DD | DD ≥ VaRα(DD)]You sort all drawdown observations from worst to best. CDaR is the average of the worst α-fraction of them. Bigger than the median drawdown, smaller than max drawdown.
CDaR captures tail-risk in the drawdown distribution. A portfolio with low max drawdown but a heavy CDaR has many bad drawdown events even if none hit the absolute worst. This matters for investors with hard liquidity constraints — pension funds, leveraged accounts, retirees in withdrawal phase.
Over 1000 daily drawdown observations: the 50 worst (5%) have drawdowns ranging from −12% to −35%, averaging −22%.
CDaR(5%) = −22%
For comparison: VaR(5%) of drawdown is −12% (the threshold) and Max DD is −35% (the single worst).
CDaR(5%) typically runs 30–60% of Max DD for normal distributions. For fat-tailed distributions, the gap is smaller (the worst 5% is closer to the very worst). For thin-tailed distributions, the gap is larger.
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Open the CDaR (Conditional Drawdown at Risk) Calculator →CVaR (Conditional Value at Risk) · Maximum Drawdown · Ulcer Index · Drawdown
Max DD is the single worst drawdown. CDaR is the average of the worst α-fraction of drawdowns — it captures repeated tail events that Max DD ignores.
5% is standard. For more conservative risk management, 1% can be used. The smaller α, the closer CDaR approaches Max DD.
For investors with serial liquidity needs — those who need the portfolio to be above certain levels at multiple points, not just at one final moment.
Yes — at the 5% level by default, alongside Max DD and Ulcer Index.
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