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On The Benefits Of Robust Asset Allocation For Cppi Strategies

In: Alternative Investments And Strategies

Author

Listed:
  • 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)

Abstract

In 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.

Suggested Citation

  • Katrin Schöttle & Ralf Werner, 2010. "On The Benefits Of Robust Asset Allocation For Cppi Strategies," World Scientific Book Chapters, in: Rüdiger Kiesel & Matthias Scherer & Rudi Zagst (ed.), Alternative Investments And Strategies, chapter 12, pages 295-326, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814280112_0012
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    Cited by:

    1. Weng, Chengguo, 2013. "Constant proportion portfolio insurance under a regime switching exponential Lévy process," Insurance: Mathematics and Economics, Elsevier, vol. 52(3), pages 508-521.
    2. Agić-Šabeta Elma, 2016. "Constant Proportion Portfolio Insurance Strategy in Southeast European Markets," Business Systems Research, Sciendo, vol. 7(1), pages 59-80, March.

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