Drawdown magnitude measures the percentage drop in value of a financial portfolio from its peak. Although drawdowns are crucial role in the daily operations of portfolio managers, the optimization of drawdown duration has received relatively little attention in the literature compared to drawdown magnitude. Unlike magnitude, which quantifies the drop in value, duration measures the elapsed time since a financial portfolio reached its running maximum. In 2024, Vedernikov et al. developed portfolio models focused on optimizing Average, Maximum, and Tail Drawdown Duration. This thesis, conducted in collaboration with the Equity Portfolio Management team at Assenagon Asset Management S.A., aims to investigate, empirically analyze, and validate portfolio models for optimizing the Average Drawdown Duration (ADDR) and the Maximum Drawdown Duration (MDDR). Building on the theoretical foundations of these models, we will adapt the algorithms and methodologies for practical use by portfolio managers. Specifically, we develop and test three different approaches, including rolling window, expanding window, and beta-adjusted returns methods. Before introducing, analyzing, and adapting the portfolio drawdown duration models for real-world applications, we first define and optimize the drawdown duration metric from a purely financial mathematics perspective. To achieve this, we adopt the Bachelier model to derive the expected drawdown duration for a single asset. Based on these theoretical results, we then optimize the drawdown duration of our wealth process within the Bachelier model. The combination of the findings from the initial purely theoretical part with the subsequent empirical analysis and evaluation of the ADDR model and the MDDR model enables a comprehensive assessment and evaluation of optimizing the drawdown duration of financial portfolios.     «

Drawdown magnitude measures the percentage drop in value of a financial portfolio from its peak. Although drawdowns are crucial role in the daily operations of portfolio managers, the optimization of drawdown duration has received relatively little attention in the literature compared to drawdown magnitude. Unlike magnitude, which quantifies the drop in value, duration measures the elapsed time since a financial portfolio reached its running maximum. In 2024, Vedernikov et al. dev...     »