Model for Dynamic Multiple of CPPI Strategy. (24th June 2014)

• Record Type: Journal Article
• Authors: Xing, Guangyuan; Xue, Yong; Feng, Zongxian; Wu, Xiaokang
• Other Names: Huang Chuangxia Academic Editor.
• Is Part Of: Discrete dynamics in nature and society. Volume 2014(2014)
• Publication Date: 2014-06-24
• Subjects: System analysis -- Periodicals; Dynamics -- Periodicals; Chaotic behavior in systems -- Periodicals; Differentiable dynamical systems -- Periodicals; 003.05
• DOI: 10.1155/2014/260484
• Languages: English
• ISSNs: 1026-0226

Abstract

Abstract : Focusing on the parameter "Multiple" of CPPI strategy, this study proposes a dynamic setting model of multiple for gap risk management purpose. First, CPPI gap risk is measured as the probability that the value loss of active asset exceeds its allowed maximum drop determined by a given multiple setting. Moreover, according to the statistical estimation using SV-EVT approach, a dynamic choice of multiple is detailed as a function of time-varying asset volatility, expected loss, and the possibility of occurrence of extreme events in the active asset returns illustrated empirically on Shanghai composite index data. This study not only enriches the literature of dynamic proportion portfolio insurance, but also provides a practical reference for CPPI investors to choose a moderate risky exposure achieving gap risk management, which promotes CPPI's application in emerging capital market.