Question 1

What does Conditional drawdown at risk minimise?

Accepted Answer

It minimises the average of the worst share of drawdowns along the path — the idea of Min CVaR, applied to under-water depth instead of daily loss. Every day the portfolio spends under water contributes its depth, and the method pushes down the average of the deepest 5%. $$ {	ext{CDaR}_\alpha} = 	ext{average of the worst } {\alpha} 	ext{ of } {D_t}, \qquad {D_t} = \max_{s \le t} {V_s} - {V_t} $$ where: the value the method minimises the Tail share — the share of the path's days that is averaged how far the portfolio sits below its highest value so far, on day t the portfolio's value on a given day Because a drawdown persists until the portfolio recovers, a mix that heals slowly racks up many deep readings, and one that bounces back within days racks up few — which is the difference variance cannot see.

Question 2

How does Fincanva handle it?

Accepted Answer

The method picker labels it "CDaR · Conditional drawdown at risk" and describes it as "Reduces the longest and deepest stretches below the peak". It is offered at both levels: across the instruments of a strategy, and across the strategies of a Combined. Its one setting is the Tail share, from 1% to 25% and 5% by default. It reads the calculation window (In-sample, 12 months by default) and does not read the Covariance matrix choice. The picker marks it "slow to compute": each rebalance solves an optimisation over the whole path.

Question 3

What happens when the window is too short for the tail share?

Accepted Answer

When the window times the tail share comes to less than one day, the average becomes the single deepest day, and the app shows the same "Too little data for this tail share" warning as Min CVaR, offering to lengthen the in-sample period or switch to Entropic value at risk.

The drawdown path is measured on log returns, so its depths sit a hair away from the drawdowns of the compounded equity curve shown in the results.

Question 4

Which plan includes Conditional drawdown at risk?

Accepted Answer

It depends on your plan, at each level where the method is offered.

Inside a strategy

Included from Ultimate upwards. See what each plan includes.

Inside a Combined

Included from Ultimate upwards. See what each plan includes.

Question 5

What does it look like in practice?

Accepted Answer

Two mixes have the same volatility over a 12-month window of about 252 days, and both suffer the same −10% drop at some point.

Mix A recovers its peak within a week. Across the year it spends about 20 days under water, and only a handful of them deeper than −5%.
Mix B takes three months to recover. It spends about 70 days under water, dozens of them deeper than −5%.

At a 5% tail share the method averages the deepest 252 × 5% ≈ 13 under-water readings. For A they include its short dip and some shallow ones; for B all 13 come from its long slump. B's average is far deeper, so Conditional drawdown at risk prefers A — while a variance-based method, seeing equal volatility, would call the two equal.