Portfolio insurance: Gap risk under conditional multiples ?
We extend one of the two main portfolio insurance methods, namely the CPPI method. We allow the multiple to vary over time while controlling the risk of such portfolio management. A quantile approach is introduced together with expected shortfall criteria. We provide explicit upper bounds on the multiple as function of past asset returns and volatilities. We show how this new asset allocation method performs for various financial market conditions.
portfolio insurance finance investment analysis risk management cppi with conditional multiples