Constant Proportion Portfolio Insurance Effectiveness with Transaction Costs

In this paper, we examine main properties of the Constant Proportion Portfolio Insurance (CPPI) strategy, when trading in continuous-time is not allowed. We focus instead on stochastic-time rebalancing. We prove that investor's tolerance determines crucially portfolio performance, in particular when taking transaction costs into account. We illustrate this feature in the geometric Brownian case and we provide some numerical insights in this framework.

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Year of publication:	2014-08-29
Authors:	Mkaouar, Farid ; Prigent, Jean-Luc
Institutions:	Institut de Préparation à l'Administration et à la Gestion (IPAG)
Subject:	Portfolio insurance \| CPPI with transaction cost \| Tolerance

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Notes:	Number 2014-509 13 pages
Classification:	C61 - Optimization Techniques; Programming Models; Dynamic Analysis ; G11 - Portfolio Choice
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010891042