<t>The expected value of CPPI payoff is the same if the risk neutrality is taken in the underlying returns or after CPPI returns. It is equal with the forward value of the initial investment value. If we take the risk-neutrality at the first or second step the results are the same.This holds in the ...

<t>I opted for the first version (first transform the returns in risk-neutral and then run the CPPI). In a paper by Bertrand and Pringent they derive the terminal value of the strategy in closed form ( cases when returns are normally distributed and a fixed multiplier). Based on these results the ca...

<t>Thanks Hans,Indeed the results looks very different. One reason that I identified is that the volatility of the CPPI returns are dependent on the drift of the underlying index. So if you would transform the index in risk-neutral measure and then derive CPPI, the volatility of the CPPI returns is ...

<t>Assume I want to price a call on a CPPI based on an index as underlying. There are two ways to derive CPPI risk-neutral returns for pricing the option:1. transform the index returns in the risk neutral measure and then run the CPPI with these returns2. run the CPPI with the index risk/return in n...