CPPI and some questions
Posted: January 30th, 2006, 8:13 am
i'm a quant finance student and am currently doing research on CPPI, i have some questions about CPPI:why is everyone talking about CPPI as if it is a traded asset on itself? isnt it just a strategy?are there any suggestions to do research about CPPI? In Black & Perold(1992), the authors suggest to CPPI is equal to a perpetual american call, is this anything like an XPO as on ? null link to xpotrade However in 1992 i dont think they meant that it is a product u can buy. my question is: is it possible to say, short an XPO (= perpetual american call) and use CPPI as hedge strategy? if so, what are exactly the trading rules?In the above paper, the authors use the reserve asset as numeraire, and say that it simplifies the calculations, i dont really understand why?About the floor, is this assumed to be absolutly constant at a value X or does the floor change over time eventually, e.g. due to interest.i'm also looking for articles of black and rouhani:Constant Proportion Portfolio Insurance: Volatility and the Soft-Floor strategy(1988), Goldman Sachs Research.and Black, F., & Rouhani, R. (1989). Constant proportion portfolio insurance and thesynthetic put option : a comparison, in Institutional Investor focus on InvestmentManagement, edited by Frank J. Fabozzi. Cambridge, Mass. : Ballinger, pp 695-708.articles may be sent to arigatoh@hotmail.comhelp appreciated