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After reading Strub, Issam S., Trade Sizing Techniques for Drawdown and Tail Risk Control (May 21, 2012), I thought I should try to tie this with 2 other good R pieces on Conditional Drawdown:
As always, NONE OF THIS IS INVESTMENT ADVICE.
In Strub’s paper, he uses conditional drawdown (cdar) and conditional var (cvar) to calculate the position size on directional (breakout determined) long/short currency positions. The results were interesting enough to attempt to replicate with slight changes. For this post, I will use cdar to determine the position size on a long-only Mebane Faber 10-month moving average strategy. We will start with an efficient frontier comparison and then abandon the frontier for a systematic approach.
R code from GIST: