Model for Dynamic Multiple of CPPI Strategy

摘要

Focusing on the parameter “Multiple” of CPPI strategy, this study proposes a dynamic setting model of multiple for gap risk management purpose. First, CPPI gap risk is measured as the probability that the value loss of active asset exceeds its allowed maximum drop determined by a given multiple setting. Moreover, according to the statistical estimation using SV-EVT approach, a dynamic choice of multiple is detailed as a function of time-varying asset volatility, expected loss, and the possibility of occurrence of extreme events in the active asset returns illustrated empirically on Shanghai composite index data. This study not only enriches the literature of dynamic proportion portfolio insurance, but also provides a practical reference for CPPI investors to choose a moderate risky exposure achieving gap risk management, which promotes CPPI’s application in emerging capital market.