ON THE BENEFITS OF ROBUST ASSET ALLOCATION FOR CPPI STRATEGIES

Katrin Schöttle and Ralf Werner
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Katrin Schöttle: MEAG MUNICH ERGO AssetManagement GmbH, Oskar-von-Miller-Ring 18, 80333 München, Germany
Ralf Werner: Hypo Real Estate Holding AG, Unsöldstrasse 2, 80538 München, Germany

Chapter 12 in Alternative Investments and Strategies, 2010, pp 295-326 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractIn recent years, new ideas for the robustification of the traditional Markowitz frontier have appeared in the literature. Based on one of these ideas — the so-called robust counterparts — we introduce the concept of the robustified efficient frontier.As mean– variance efficient portfolios are frequently used as risky assets for CPPI strategies, we investigate the behavior of such strategies under estimation risk. Based on a toy example, we explain the main idea how the concept of a robustified frontier can be used to improve the performance of CPPI strategies. For this purpose, we compare the theoretical performance of CPPI strategies based on the original and the robust efficient frontier.

Keywords: Alternative Investments; Portfolio Selection; Trading Strategy; Product Innovations; CPPI; Portfolio Optimization; Portfolio Insurance (search for similar items in EconPapers)
Date: 2010
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