#'@title Calculate the Economic Drawdown
#'
#'@description
#'\code{EconomicDrawdown} calculates the Economic Drawdown(EDD) for
#'a return series.To calculate the economic drawdown cumulative
#'return and economic max is calculated for each point. The risk
#'free return(rf) is taken as the input.
#'
#'Economic Drawdown is given by the equation
#'
#'\deqn{EDD(t)=1-\frac{W_t}/{EM(t)}}
#'
#'Here EM stands for Economic Max.
#'
#'
#'@param R an xts, vector, matrix, data frame, timeseries, or zoo object of asset return.
#'@param Rf risk free rate can be vector such as government security rate of return
#'@param geometric utilize geometric chaining (TRUE) or simple/arithmetic chaining(FALSE)
#'to aggregate returns, default is TRUE
#'@param \dots any other variable
#'@author Pulkit Mehrotra
#'@seealso \code{\link{chart.REDD}} \code{\link{EDDCOPS}}
#'\code{\link{rollDrawdown}} \code{\link{REDDCOPS}} \code{\link{rollEconomicMax}}
#'@references Yang, Z. George and Zhong, Liang, Optimal Portfolio Strategy to
#'Control Maximum Drawdown - The Case of Risk Based Dynamic Asset Allocation (February 25, 2012)
#'@examples
#'data(edhec)
#'EconomicDrawdown(edhec,0.08,100)
#'
#' @export
EconomicDrawdown<-function(R,Rf, geometric = TRUE,...)
{
# DESCRIPTION:
# calculates the Economic Drawdown(EDD) for
# a return series.To calculate the economic drawdown cumulative
# return and rolling economic max is calculated for each point. The risk
# free return(rf) is taken as the input.
# FUNCTION:
x = checkData(R)
columns = ncol(x)
n = nrow(x)
columnnames = colnames(x)
rf = checkData(Rf)
nr = length(Rf)
if(nr != 1 && nr != n ){
stop("The number of rows of the returns and the risk free rate do not match")
}
EDD<-function(xh,geometric){
if(geometric)
Return.cumulative = cumprod(1+xh)
else Return.cumulative = 1 + cumsum(xh)
l = length(Return.cumulative)
if(nr == 1){
EM = max(Return.cumulative*(1+rf)^(l-c(1:l)))
}
else{
rf = rf[index(xh)]
prodRf = cumprod(1+rf)
EM = max(Return.cumulative*as.numeric(last(prodRf)/prodRf))
}
result = 1 - last(Return.cumulative)/EM
}
for(column in 1:columns){
column.drawdown <- as.xts(apply.fromstart(x[,column], FUN = EDD, geometric = geometric,gap = 1))
if(column == 1)
Economicdrawdown = column.drawdown
else Economicdrawdown = merge(Economicdrawdown, column.drawdown)
}
colnames(Economicdrawdown) = columnnames
#Economicdrawdown = reclass(Economicdrawdown, x)
return(Economicdrawdown)
}
###############################################################################
# R (http://r-project.org/) Econometrics for Performance and Risk Analysis
#
# Copyright (c) 2004-2014 Peter Carl and Brian G. Peterson
#
# This R package is distributed under the terms of the GNU Public License (GPL)
# for full details see the file COPYING
#
# $Id: edd.R $
#
##############################################################################
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