Theory of Constant Proportion Portfolio Insurance PDF Download

Author: Fischer Black
Publisher:
ISBN:
Category : Portfolio management
Languages : en
Pages : 32

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Author: Geoffrey H. Kingston
Publisher:
ISBN: 9780731666690
Category : Portfolio management
Languages : en
Pages : 14

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Author: Geoffrey H. Kingston
Publisher:
ISBN: 9780949269584
Category : Portfolio management
Languages : en
Pages : 7

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Author: Mingming Wang
Publisher:
ISBN:
Category : Electronic Dissertations
Languages : en
Pages : 168

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Book Description
The concept of Constant Proportion Portfolio Insurance (CPPI) in terms of jump-diffusion, as well as the associated mean-variance hedging problem, has been studied. Three types of risk related to: the probability of loss, the expected loss, and the loss distribution are being analyzed. Both the discrete trading time case and the continuous trading time case have been studied. Next, CPPI with stochastic dynamic floors are being discussed. The concept of exponential proportion portfolio insurance is being introduced. Finally CPPI associated with the fractional Brownian market is being studied.

Author: Anil Khuman
Publisher:
ISBN:
Category :
Languages : en
Pages : 33

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Author: Rama Cont
Publisher:
ISBN:
Category :
Languages : en
Pages : 27

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Book Description
Constant proportion portfolio insurance (CPPI) allows an investor to limit downside risk while retaining some upside potential by maintaining an exposure to risky assets equal to a constant multiple of the quot;cushion,quot; the difference between the current portfolio value and the guaranteed amount. Whereas in diffusion models with continuous trading, this strategy has no downside risk, in real markets this risk is non-negligible and grows with the multiplier value. We study the behavior of CPPI strategies in models where the price of the underlying portfolio may experience downward jumps. Our framework leads to analytically tractable expressions for the probability of hitting the floor, the expected loss and the distribution of losses. This allows to measure the gap risk but also leads to a criterion for adjusting the multiplier based on the investor's risk aversion. Finally, we study the problem of hedging the downside risk of a CPPI strategy using options. The results are applied to a jump-diffusion model with parameters estimated from returns series of various assets and indices.

Author: Koon-Kam Johney Lee
Publisher:
ISBN:
Category : Investment guaranty insurance
Languages : en
Pages : 164

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Author: Cathrine Jessen
Publisher:
ISBN:
Category :
Languages : en
Pages :

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A practical implementation of constant proportion portfolio insurance (CPPI) strategies must inevitably take market frictions into account. I study a CPPI in a setting with trading costs, fees and borrowing restrictions, and relax the assumption of continuous portfolio rebalancing. The main goals are to cover issuer's gap risk and to maximize CPPI performance according to investor's preferences over possible multipliers: the proportionality factor that determines the risky exposure of a CPPI. Investment objectives are described by the Sortino ratio and alternatively by an S-shaped utility function known from behavioral finance. Investors with either objective will choose a lower multiplier than if CPPI performance is measured by the expected return. Discrete-time trading requires a portfolio rebalancing rule, which affects both performance and gap risk. Two commonly applied strategies, rebalancing at equidistant time steps and rebalancing based on fixed market moves, are compared to a new rule, which takes trading costs into account. While the new and the market-based rules deliver similar CPPI performance, the new rebalancing rule achieves this by fewer trading interventions. Issuer's gap risk can be covered by a fee charge, by hedging or by an artificial floor. A new approach to determine the artificial floor is introduced. All three methods reduce losses from gap events effectively at only a small cost to the investor.

Author: Ralf Hohmann
Publisher: GRIN Verlag
ISBN: 334640868X
Category : Business & Economics
Languages : en
Pages : 23

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Scientific Essay from the year 2021 in the subject Business economics - Investment and Finance, , language: English, abstract: Investments in money and capital markets involve different loss potentials that market participants should be able to manage. Below follows an overview and comparison of selected strategies to manage these risks. Portfolio insurance (PI) strategies were developed in the 1980s. They are used to hedge portfolios or individual investments against price losses. The volume of assets hedged with these strategies is significant. Different forms of individual strategies have developed over the years. Risk quantification and Value at Risk (VAR) strategies emerged around the same time. Risks of individual investments or portfolios were measured and different strategies were developed to take them into account in Value at Risk optimised portfolios (VaRoP). VaRoP is a strategy that calculates an optimal portfolio taking into account a given or permissible maximum VAR. Both strategies are intended to protect portfolios from losses in value. Their similarities and differences as well as their successes are presented and summarised in this paper. Their applicability in practice is also examined.

Author: Giuseppe Corvino
Publisher:
ISBN:
Category :
Languages : en
Pages : 35

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