Optimization of CPPI Strategies

Optimization of CPPI Strategies
Author: Luca Bruschetti
Publisher:
Total Pages:
Release: 2018
Genre:
ISBN:

Focusing on CHF investors, the present Master thesis carries out an optimization of Constant Proportion Portfolio Insurance products in terms of multiple, floor and trading filter, while at the same time tackling the issue of negative interest rates. In a CPPI setup, negative interest rates cause the problem of portfolio value trespassing the level of guaranteed wealth at maturity even once the risk exposure has been completely eroded and the portfolio is entirely invested in a risk-free asset after a sustained period of market correction. As such, while in standard CPPI theory the risk-free asset is thought to correspond to call money market deposits, here we propose a different underlying, namely a CHF denominated ETF, tracking the performance of long-term Swiss Governmental Bonds. Having introduced CPPI strategies both from a theoretical and a mathematical point of view, we adopt a block-bootstrapping approach in order to create 500 paths for both the risky and risk-free component to be used as underlying for CPPI simulation. We take different performance and risk measures into account and finally try to identify and select the possibly best setup(s) for Swiss market investors. We argue that within all possible combinations of floor, multiple and trading filter considered here, the class of strategies with a multiple within [4;6], a floor in the range [91;94] and a 10% (exposure linked) trading filter is best suited for CHF investors with different risk appetites and willing to be exposed to the Swiss equity market. Finally, we show that the revised CPPI setup, as proposed in the paper, might be considered as a valuable alternative for standard CPPI products in an market environment where negative deposit rates are prevailing.

Alternative Investments and Strategies

Alternative Investments and Strategies
Author: Rdiger Kiesel
Publisher: World Scientific
Total Pages: 414
Release: 2010
Genre: Business & Economics
ISBN: 9814280100

This book combines academic research and practical expertise on alternative assets and trading strategies in a unique way. The asset classes that are discussed include: credit risk, cross-asset derivatives, energy, private equity, freight agreements, alternative real assets (ARA), and socially responsible investments (SRI). The coverage on trading and investment strategies are directed at portfolio insurance, especially constant proportion portfolio insurance (CPPI) and constant proportion debt obligation (CPDO) strategies, robust portfolio optimization, and hedging strategies for exotic options.

Numerical Methods and Optimization in Finance

Numerical Methods and Optimization in Finance
Author: Manfred Gilli
Publisher: Academic Press
Total Pages: 638
Release: 2019-08-30
Genre:
ISBN: 0128150653

Computationally-intensive tools play an increasingly important role in financial decisions. Many financial problems-ranging from asset allocation to risk management and from option pricing to model calibration-can be efficiently handled using modern computational techniques. Numerical Methods and Optimization in Finance presents such computational techniques, with an emphasis on simulation and optimization, particularly so-called heuristics. This book treats quantitative analysis as an essentially computational discipline in which applications are put into software form and tested empirically. This revised edition includes two new chapters, a self-contained tutorial on implementing and using heuristics, and an explanation of software used for testing portfolio-selection models. Postgraduate students, researchers in programs on quantitative and computational finance, and practitioners in banks and other financial companies can benefit from this second edition of Numerical Methods and Optimization in Finance. Introduces numerical methods to readers with economics backgrounds Emphasizes core simulation and optimization problems Includes MATLAB and R code for all applications, with sample code in the text and freely available for download

Portfolio Optimization and Performance Analysis

Portfolio Optimization and Performance Analysis
Author: Jean-Luc Prigent
Publisher: CRC Press
Total Pages: 451
Release: 2007-05-07
Genre: Business & Economics
ISBN: 142001093X

In answer to the intense development of new financial products and the increasing complexity of portfolio management theory, Portfolio Optimization and Performance Analysis offers a solid grounding in modern portfolio theory. The book presents both standard and novel results on the axiomatics of the individual choice in an uncertain framework, cont

Alternative Investments and Strategies

Alternative Investments and Strategies
Author: Rüdiger Kiesel
Publisher: World Scientific
Total Pages: 414
Release: 2010
Genre: Business & Economics
ISBN: 9814280119

This book combines academic research and practical expertise on alternative assets and trading strategies in a unique way. The asset classes that are discussed include : credit risk, cross-asset derivatives, energy, private equity, freight agreements, alternative real assets (ARA), and socially responsible investments (SRI). The coverage on trading and investment strategies are directed at portfolio insurance, especially constant proportion portfolio insurance (CPPI) and constant proportion debt obligation (CPDO) strategies, robust portfolio optimization, and hedging strategies for exotic options.

Effectiveness of CPPI Strategies under Discrete-Time Trading

Effectiveness of CPPI Strategies under Discrete-Time Trading
Author: Antje Brigitte Mahayni
Publisher:
Total Pages: 26
Release: 2008
Genre:
ISBN:

The paper analyzes the effectiveness of the constant proportion portfolio insurance (CPPI) method under trading restrictions. If the CPPI method is applied in continuous time, the CPPI strategies provide a value above a floor level unless the price dynamic of the risky asset permits jumps. The risk of violating the floor protection is called gap risk. In practice, it is caused by liquidity constraints and price jumps. Both can be modelled in a setup where the price dynamic of the risky asset is described by a continuous-time stochastic process but trading is restricted to discrete time. We propose a discrete-time version of the continuous-time CPPI strategies which satisfies three conditions. The resulting strategies are self-financing, the asset exposure is non-negative and the value process converges. We determine risk measures such as the shortfall probability and the expected shortfall and discuss criteria which ensure that the gap risk does not increase to a level which contradicts the original intention of portfolio insurance. In addition, we introduce proportional transaction costs and analyze their effects on the risk profile.

Optimizing Corporate Portfolio Management

Optimizing Corporate Portfolio Management
Author: Anand Sanwal
Publisher: John Wiley & Sons
Total Pages: 227
Release: 2007-04-27
Genre: Business & Economics
ISBN: 0470126884

If where an organization allocates its resources determines its strategy, why is it that so few companies actively manage the resource allocation process? "Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy" goes beyond platitudes about why you should use corporate portfolio management (CPM) by offering a practical methodology to bring this powerful discipline to your organization. "Optimizing Corporate Portfolio Management" takes an expansive view of where CPM can be utilized by demonstrating that it can be used across any business line, product group or functional area, e.g., IT, R&D, innovation, marketing, salesforce, capital expenditure, etc. CPM is appropriate anywhere discretionary investments are being selected and executed. As a result, other terms used to describe portfolio management such as IT portfolio management, enterprise portfolio management, and project portfolio management are all merely subsets or slices of CPM. The book is written by Anand Sanwal, an expert on CPM, who has led American Express' CPM discipline (referred to as American Express Investment Optimization). American Express' CPM efforts are widely recognized as the most extensive, substantial and progressive deployment of CPM across any organization. Sanwal avoids academic theories and consultant jargon to ultimately deliver pragmatic and proven recommendations on how to make CPM a reality. The book features a foreword by Gary Crittenden, former CFO and EVP of American Express, and several case studies from leading financial services, technology, and government organizations utilizing CPM. Additionally, the book has received significant praise from thought leaders at Google, HP, American Express, The CFO Executive Board, Gartner, Accenture Marketing Sciences, The Wharton School of Business and many others.

Extreme Events in Finance

Extreme Events in Finance
Author: Francois Longin
Publisher: John Wiley & Sons
Total Pages: 638
Release: 2016-10-17
Genre: Business & Economics
ISBN: 1118650190

A guide to the growing importance of extreme value risk theory, methods, and applications in the financial sector Presenting a uniquely accessible guide, Extreme Events in Finance: A Handbook of Extreme Value Theory and Its Applications features a combination of the theory, methods, and applications of extreme value theory (EVT) in finance and a practical understanding of market behavior including both ordinary and extraordinary conditions. Beginning with a fascinating history of EVTs and financial modeling, the handbook introduces the historical implications that resulted in the applications and then clearly examines the fundamental results of EVT in finance. After dealing with these theoretical results, the handbook focuses on the EVT methods critical for data analysis. Finally, the handbook features the practical applications and techniques and how these can be implemented in financial markets. Extreme Events in Finance: A Handbook of Extreme Value Theory and Its Applications includes: Over 40 contributions from international experts in the areas of finance, statistics, economics, business, insurance, and risk management Topical discussions on univariate and multivariate case extremes as well as regulation in financial markets Extensive references in order to provide readers with resources for further study Discussions on using R packages to compute the value of risk and related quantities The book is a valuable reference for practitioners in financial markets such as financial institutions, investment funds, and corporate treasuries, financial engineers, quantitative analysts, regulators, risk managers, large-scale consultancy groups, and insurers. Extreme Events in Finance: A Handbook of Extreme Value Theory and Its Applications is also a useful textbook for postgraduate courses on the methodology of EVTs in finance.

Advances in Natural Computation

Advances in Natural Computation
Author: Ke Chen
Publisher: Springer Science & Business Media
Total Pages: 1383
Release: 2005-08-17
Genre: Computers
ISBN: 354028320X

This book and its sister volumes, i.e., LNCS vols. 3610, 3611, and 3612, are the proceedings of the 1st International Conference on Natural Computation (ICNC 2005), jointly held with the 2nd International Conference on Fuzzy Systems and Knowledge Discovery (FSKD 2005, LNAI vols. 3613 and 3614) from 27 to 29 August 2005 in Changsha, Hunan, China.

Quantitative Fund Management

Quantitative Fund Management
Author: M.A.H. Dempster
Publisher: CRC Press
Total Pages: 488
Release: 2008-12-22
Genre: Business & Economics
ISBN: 1420081926

The First Collection That Covers This Field at the Dynamic Strategic and One-Period Tactical Levels. Addressing the imbalance between research and practice, Quantitative Fund Management presents leading-edge theory and methods, along with their application in practical problems encountered in the fund management industry. A Current Snapshot of State-of-the-Art Applications of Dynamic Stochastic Optimization Techniques to Long-Term Financial Planning - The first part of the book initially looks at how the quantitative techniques of the equity industry are shifting from basic Markowitz mean-variance portfolio optimization to risk management and trading applications. This section also explores novel aspects of lifetime individual consumption investment problems, fixed-mix portfolio rebalancing allocation strategies, debt management for funding mortgages and national debt, and guaranteed return fund construction. Up-to-Date Overview of Tactical Financial Planning and Risk Management - The second section covers nontrivial computational approaches to tactical fund management. This part focuses on portfolio construction and risk management at the individual security or fund manager level over the period up to the next portfolio rebalance. It discusses non-Gaussian returns, new risk-return tradeoffs, and the robustness of benchmarks and portfolio decisions. The Future Use of Quantitative Techniques in Fund Management - With contributions from well-known academics and practitioners, this volume will undoubtedly foster the recognition and wider acceptance of stochastic optimization techniques in financial practice.