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Comparative performances of capital protection strategies in the South African marketDu Plessis, Richard Michael January 2015 (has links)
The performance of cash protection strategies implemented in the South African market are investigated in order to establish if investors are able to add value through the use of dynamic portfolio insurance methods. The analysis is performed, using monthly data, from January 1961 to August 2014 using six alternative methodologies including both a Fixed Rate and Rolling Average Stop-Loss approach, a Lock-In approach, a Constant Mix strategy, a Constant Proportion Portfolio Insurance ("CPPI") approach and an alternative CPPI approach using a Ratchet mechanism. The results indicate that the use of such cash protection strategies can markedly improve portfolio performance from a risk return perspective compared to a pure diversified investment strategy. Notably, the use of older, simpler trading strategies such as the Stop-Loss and Lock-In approaches at optimum threshold levels can still offer investors higher risk to reward benefits with less commitment required. These strategies, though, lack the flexibility observed with the more recently developed dynamic trading strategies in terms of providing for varying risk appetites.
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Resgate da otimalidade de estratégias de alocação dinâmica com seguro e alavancagem em cenários realistasVaranda, José Henrique de Oliveira 02 July 2018 (has links)
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Previous issue date: 2018-07-02 / This study evaluates which modifications can restore the theoretical performance of
dynamic asset allocation strategies that uses insurance and leverage, specifically those
known as Constant Proportion Portfolio Insurance (CPPI), when confronted with realistic
premises and scenarios. Simulations using GARCH models are applied to assess the
effects of path dependency and volatility on those strategies and to evaluate how selected
modifications mitigates those effects. These modifications are tested using the Farinelli-
Tibilleti ratio and derivations, like de Upside Potential Ratio. As main finding, the
modifications that mitigates path dependency can restore the theoretical performance of
portfolio insurance with high significance, making those preferred strategies in relation to
Buy-and-Hold (BH) or Constant-Mix (CM) for most investors in several scenarios. This
work also presents a novel modification, adapted for the risk-free market in Brazil, that
resulted in the best performing portfolio insurance strategy with great significance. / Este trabalho avalia quais modificações reestabelecem o desempenho teórico das
estratégias dinâmicas de alocação de ativos com seguro e alavancagem, denominadas
Constant Proportion Portfolio Insurance (CPPI), quando confrontadas com premissas e
cenários realistas. São realizadas simulações de modelos da família GARCH, com
parâmetros estimados do mercado, para exercitar os efeitos da dependência do caminho
e da volatilidade nestas estratégias e avaliar como as modificações selecionadas ajudam
a combate-los. A significância das modificações é testada pela medida Farinelli-Tibiletti,
sobre tudo a combinação que resulta na razão Upside Potential, onde conclui-se que
existem modificações significantes que são capazes de resgatar o desempenho teórico
da estratégia CPPI, inclusive tornando-a preferível às estratégias clássicas Buy-and-Hold
(BH) e Constant-Mix (CM) em certos cenários. Por fim, o trabalho apresenta uma
modificação inovadora, derivada do ajuste à realidade do mercado brasileiro, que acabou
por apresentar o maior nível de desempenho relativo do método CPPI, com elevada
significância.
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Pricing CPPI Capital Guarantees: A Lagrangian FrameworkMorley, Christopher Stephen Band January 2011 (has links)
A robust computational framework is presented for the risk-neutral valuation of capital
guarantees written on discretely-reallocated portfolios following the Constant Proportion
Portfolio Insurance (CPPI) strategy. Aiming to address the (arguably more realistic)
cases where analytical results are unavailable, this framework accommodates risky-asset
jumps, volatility surfaces, borrowing restrictions, nonuniform reallocation schedules and
autonomous CPPI floor trajectories. The two-asset state space representation developed
herein facilitates visualising the CPPI strategy, which in turn provides insight into grid
design and interpolation. It is demonstrated that given a deterministic process for the
risk-free rate, the pricing problem can be cast as solving cascading systems of 1D partial
integro-differential equations (PIDEs). This formulation’s stability and monotonicity are
studied. In addition to making more sense financially, the limited borrowing variant of
the CPPI strategy is found to be better suited than the classical (unlimited borrowing)
counterpart for bounded-domain calculations. Consequently, it is demonstrated how the
unlimited borrowing problem can be approximated by imposing an artificial borrowing limit.
For implementation validation, analytical solutions to special cases are derived. Numerical
tests are presented to demonstrate the versatility of this framework.
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Pricing CPPI Capital Guarantees: A Lagrangian FrameworkMorley, Christopher Stephen Band January 2011 (has links)
A robust computational framework is presented for the risk-neutral valuation of capital
guarantees written on discretely-reallocated portfolios following the Constant Proportion
Portfolio Insurance (CPPI) strategy. Aiming to address the (arguably more realistic)
cases where analytical results are unavailable, this framework accommodates risky-asset
jumps, volatility surfaces, borrowing restrictions, nonuniform reallocation schedules and
autonomous CPPI floor trajectories. The two-asset state space representation developed
herein facilitates visualising the CPPI strategy, which in turn provides insight into grid
design and interpolation. It is demonstrated that given a deterministic process for the
risk-free rate, the pricing problem can be cast as solving cascading systems of 1D partial
integro-differential equations (PIDEs). This formulation’s stability and monotonicity are
studied. In addition to making more sense financially, the limited borrowing variant of
the CPPI strategy is found to be better suited than the classical (unlimited borrowing)
counterpart for bounded-domain calculations. Consequently, it is demonstrated how the
unlimited borrowing problem can be approximated by imposing an artificial borrowing limit.
For implementation validation, analytical solutions to special cases are derived. Numerical
tests are presented to demonstrate the versatility of this framework.
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