Author : Benjamin Hamidi
Publisher :
ISBN 13 :
Total Pages : 66 pages
Book Rating : 4.:/5 (129 download)
Book Synopsis A Dynamic Autoregressive Expectile for Time-Invariant Portfolio Protection Strategies by : Benjamin Hamidi
Download or read book A Dynamic Autoregressive Expectile for Time-Invariant Portfolio Protection Strategies written by Benjamin Hamidi and published by . This book was released on 2018 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Among the most popular techniques for portfolio insurance strategies that are used nowadays, the so-called quot;Constant Proportion Portfolio Insurancequot; (CPPI) allocation simply consists in reallocating the risky part of a portfolio according to the market conditions. This general method crucially depends upon a parameter - called the multiple - guaranteeing a predetermined floor whatever the plausible market evolutions. However, the unconditional multiple is defined once and for all in the traditional CPPI setting; we propose in this article an alternative to the standard CPPI method, based on the determination of a conditional multiple. In this time-varying framework, the multiple is conditionally determined in order the risk exposure to remain constant, but depending on market conditions. We thus propose to define the multiple as a function of Expected Shortfall.After briefly recalling the portfolio insurance principles, the CPPI framework and the main properties of the conditional or unconditional multiples, we present a Dynamic AutoRegressive Expectile (DARE) class of models for the conditional multiple in a time-varying strategy whose aim is to adapt the current exposition to market conditions following a traditional risk management philosophy. We illustrate this approach in a Time-Invariant Portfolio Protection (TIPP) strategy, as introduced by Estep and Kritzman (1988), which aims to increase the protected floor according to the insured portfolio performance. Finally, we use an option valuation approach for measuring the gap risk in both conditional and unconditional approaches.