🧰 Portfolio Optimization: MAD & MDD

Quantitative Researcher | Mustafa MAJJI

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📚 Project Overview

In this project, we explore alternative portfolio optimization methods: Mean Absolute Deviation (MAD) and Maximum Drawdown (MDD). These approaches are considered more robust because they do not assume any specific distribution of asset returns. Moreover, they allow us to evaluate portfolio risk from different perspectives—particularly focusing on absolute deviation and worst-case loss.

Specifically:

• Mean Absolute Deviation (MAD): Constructs a portfolio whose returns deviate as little as possible from a target expected return, measured using absolute deviations over all time periods.

• Maximum Drawdown (MDD): Builds a portfolio that minimizes the maximum observed loss from a peak to a trough over a given period, subject to a predefined risk threshold.

🚀 Repository Structure

• Images: Contains all images used in the notebook.

• Theory: A PDF document providing a detailed explanation of the theory behind the models.

• MAD & MDD Portfolio Optimization.ipynb: A Jupyter Notebook that explains both methods and demonstrates the optimization process.

📪 Contact

For any information, feedback or questions, please contact me