Economics at your fingertips  

A Dynamic AutoRegressive Expectile for Time-Invariant Portfolio Protection Strategies

Benjamin Hamidi (), Bertrand Maillet and Jean-Luc Prigent ()
Additional contact information
Benjamin Hamidi: Neuflize OBC Investissements - Neuflize OBC Investissements

Working Papers from HAL

Abstract: "Constant proportion portfolio insurance" (CPPI) is nowadays one of the most popular techniques for portfolio insurance strategies. It simply consists of reallocating the risky part of a portfolio with respect to market conditions, via a leverage parameter - called the multiple - guaranteeing a predetermined floor. We propose to introduce a conditional time-varying multiple as an alternative to the standard unconditional CPPI method, directly linked to actual risk management problematics. This "ex ante" approach for the conditional multiple aims to diversify the risk model associated, for example, with the expected shortfall (ES) or extreme risk measure estimations. First, we recall the portfolio insurance principles, and main properties of the CPPI strategy, including the time-invariant portfolio protection (TIPP) strategy, as introduced by Estep and Kritzman (1988). We emphasize the existence of an upper bound on the multiple, for example to hedge against sudden drops in the market. Then, we provide the main properties of the conditional multiples for well-known financial models including the discrete-time portfolio rebalancing case and Lévy processes to describe the risky asset dynamics. For this purpose, we precisely define and evaluate different gap risks, in both conditional and unconditional frameworks. As a by-product, the introduction of discrete or random time portfolio rebalancing allows us to determine and/or estimate the density of durations between rebalancements. Finally, from a more practical and statistical point of view due to trading restrictions, we present the class of Dynamic AutoRegressive Expectile (DARE) models for estimating the conditional multiple. This latter approach provides useful complementary information about the risk and performance associated with probabilistic approaches to the conditional multiple.

Keywords: Assurance de prtefeuille; VaR conditionnelle; Valeur Extrême; CPPI; VaR; Expected Shorfall; Expectile; Quantile Regression; Dynamic Quantile Model; Extreme Value (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ias and nep-rmg
Date: 2014-06-26
Note: View the original document on HAL open archive server:
References: Add references at CitEc
Citations View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Journal Article: A dynamic autoregressive expectile for time-invariant portfolio protection strategies (2014) Downloads
Working Paper: A Dynamic AutoRegressive Expectile for Time-Invariant Portfolio Protection Strategies (2014) Downloads
Working Paper: A Dynamic AutoRegressive Expectile for Time-Invariant Portfolio Protection Strategies (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from HAL
Series data maintained by CCSD ().

Page updated 2017-07-07
Handle: RePEc:hal:wpaper:halshs-01015390