Related papers: Options on CPPI with guaranteed minimum equity exp…
Constant Proportion Portfolio Insurance (CPPI) is a strategy designed to give participation in a risky asset while protecting the invested capital. Some gap risk due to extreme events is often kept by the issuer of the product: a put option…
Constant Proportion Portfolio Insurance (CPPI) is an investment strategy designed to give participation in the performance of a risky asset while protecting the invested capital. This protection is however not perfect and the gap risk must…
The purpose of this article is to introduce, analyze and compare two performance participation methods based on a portfolio consisting of two risky assets: Option-Based Performance Participation (OBPP) and Constant Proportion Performance…
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…
In this paper, we solve portfolio rebalancing problem when security returns are represented by uncertain variables considering transaction costs. The performance of the proposed model is studied using constant-proportion portfolio insurance…
This paper studies a variable proportion portfolio insurance (VPPI) strategy. The objective is to determine the risk multiplier by maximizing the extended Omega ratio of the investor's cushion, using a binary stochastic benchmark. When the…
In this paper, we investigate an optimal investment problem associated with proportional portfolio insurance (PPI) strategies in the presence of jumps in the underlying dynamics. PPI strategies enable investors to mitigate downside risk…
This paper presents numerical algorithm and results for pricing a capital protection option offered by many asset managers for investment portfolios to take advantage of market growth and protect savings. Under optimal withdrawal…
We consider Constant Proportion Portfolio Insurance (CPPI) and its dynamic extension, which may be called Dynamic Proportion Portfolio Insurance (DPPI). It is shown that these investment strategies work within the setting of F\"ollmer's…
Central clearing counterparty houses (CCPs) play a fundamental role in mitigating the counterparty risk for exchange traded options. CCPs cover for possible losses during the liquidation of a defaulting member's portfolio by collecting…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…
In this paper we take a look at a simple portfolio insurance strategy using a protective put and computationally derive the investor's governing utility structures underlying such a strategy under alternative market scenarios. Investor…
We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation…
This paper proposes Constrained Sampling Cluster Model Predictive Path Integral (CSC-MPPI), a novel constrained formulation of MPPI designed to enhance trajectory optimization while enforcing strict constraints on system states and control…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
We introduce a new method to calculate the credit exposure of European and path-dependent options. The proposed method is able to calculate accurate expected exposure and potential future exposure profiles under the risk-neutral and the…
Given the increasing importance of environmental, social and governance (ESG) factors, particularly carbon emissions, we investigate optimal proportional portfolio insurance (PPI) strategies accounting for carbon footprint reduction. PPI…
We present a new guaranteed-safe model predictive path integral (GS-MPPI) control algorithm that enhances sample efficiency in nonlinear systems with multiple safety constraints. The approach use a composite control barrier function (CBF)…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…