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Conditional Drawdown at Risk

Medium · risk_management · Quant Researcher interview question · drawdown, cdar, tail_risk, risk_management, portfolio_analytics

Conditional Drawdown at Risk (CDaR) measures the expected drawdown of an investment strategy, conditional on the drawdown exceeding a certain threshold. It extends the concept of Conditional Value at Risk (CVaR) from a simple loss distribution to the time-series path of drawdowns. This provides a crucial metric for tail risk management in hedge funds and CTAs. Task Implement the function conditional_drawdown_at_risk(returns: list, alpha: float) -> float to compute the Conditional Drawdown at Ri