Maximum downside exposure

In financial investment, the maximum downside exposure values the maximum downside to an investment portfolio. In other words, it states the most that the portfolio could lose in the event of a catastrophe. As such, MDE obviates the need to worry about the market's unpredictable swings as it virtually "eliminates" downside surprises. The formula:
The main benefit of MDE is that – unlike probabilistic risk models – it appropriately factors in all risks to the portfolio without looking at historical data and relying on simplistic statistical assumptions that don't correspond to the real world. This makes MDE a very robust risk management tool.