Having spent some time looking into dynamic Core-satellite portfolio constructions techniques, whereby you essentially use a CPPI methodology to structure your risk budget, in effect creating a asymmetric return profile. I wonder if the marginal benefit of working on such Asset Management structuring techniques is underestimated. I thought I ask here for advice, that can lead me down a road of higher knowledge of such techniques and other similar techniques. Is portfolio insurance techniques the latest development within Asset Management, or what should I study?Constructive advice will be greatly appreciated!RegardsTipTop

Portfolio Insurance has been around since the 80's (at least). Its still popular today, and has evolved somewhat over the years (additional of volatility control, for example). Obviously, given the recent market turmoil the case for CPPI has improved.In terms of asset allocation models, the standard is mean-variance optimization (CAPM). This attempts to optimize the expected returns for unit of risk (volatility). Its big shortcoming is that it ignores skew & kurtosis, i.e. fat tails. Multi-dimensional optimisation can be used to construct portfolios which optimise on the parameters. Mark Anson's book is an interesting starting point.

Thanks Helix,I guess im fishing for more information on how to calibrate multipliers in a CPPI/VPPI setting. Im aware some firms have included volatility into the framework, but would like to study more on such ideas. Sort of the next step in dynamic Core-SatellitePs. Martellini and Volker Ziemann have extended MV to include higher moments

The mulipliers used in CPPI are typically selected based on the amount of gap risk the issuer is willing to take (i.e. the CPPI mechanics will break down and fail to provide the principal protection in the event of a large one-day drop). As a rule of thumb, the strike of the embedded gap put (sold by the issuer) is equal to 100% - 1/Mulitplier. Typical values lie in the 2-5 range.