Constant proportion performance participation

Rudi Zagst, William Lim and Gaurav Khemka

Quantitative Finance, 2026, vol. 26, issue 3, 433-448

Abstract: In this paper, we introduce and analyze the constant proportion performance participation (CPPP) strategy as a generalization of the constant proportion portfolio insurance (CPPI) strategy. In the CPPP strategy, the reserve asset is risky and not risk-free. This allows the proposed strategy to alleviate the issues with standard portfolio insurance strategies during periods of low or even negative interest rates. However, the CPPP is not an insurance strategy, which guarantees a deterministic floor, as the risky reserve asset introduces systematic risk in the analysis. Given the different characteristics, we compare the conditional stochastic dominance of the CPPP over the CPPI strategy and show how CPPP strategies can be designed to stochastically dominate CPPI conditional on the returns of the reserve asset. Further, the performance of the CPPP and CPPI strategies is illustrated and compared using historical returns of the US stock and bond markets from January 2006 to November 2025.

Date: 2026
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DOI: 10.1080/14697688.2026.2615107

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