Constant proportion portfolio investment (CPPI) is a trading strategy that allows an investor to maintain an exposure to the upside potential of a risky asset while providing a capital guarantee against downside risk. The outcome of the CPPI strategy is somewhat similar to that of buying a call option, but does not use option contracts. Thus CPPI is sometimes referred to as a convex strategy, as opposed to a "concave strategy" like constant mix.
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| - Constant Proportion Portfolio Insurance (ca)
- Constant Proportion Portfolio Insurance (de)
- Constant proportion portfolio insurance (en)
- Constant Proportion Portfolio Insurance (pl)
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| - Un Constant Proportion Portfolio Insurance (acrònim: CPPI) és un tipus de valor derivat financer que crea exposició a una inversió mentre redueix el risc i garanteix el capital invertit. Un CPPI és creat amb l'adquisició d'un bo cupó zero, i amb els guanys generats es genera el palancajament. (ca)
- Die Constant Proportion Portfolio Insurance (CPPI) ist eine dynamische Portfolio-Absicherungsstrategie. (de)
- Constant proportion portfolio investment (CPPI) is a trading strategy that allows an investor to maintain an exposure to the upside potential of a risky asset while providing a capital guarantee against downside risk. The outcome of the CPPI strategy is somewhat similar to that of buying a call option, but does not use option contracts. Thus CPPI is sometimes referred to as a convex strategy, as opposed to a "concave strategy" like constant mix. (en)
- Constant Proportion Portfolio Insurance (CPPI) – jedna z technik (strategii) zarządzania portfelem inwestycyjnym. Polega na takiej konstrukcji składu portfela, by zabezpieczać osiągane zyski (w określonym stopniu). Istotny jest poziom ochrony kapitału – zazwyczaj w granicach 90–100%. CPPI pojawiła się na świecie pod koniec XX wieku, a pozytywnie przetestowano ten mechanizm np. w czasie bessy roku 1999 i po atakach 09.2001. (pl)
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| - Un Constant Proportion Portfolio Insurance (acrònim: CPPI) és un tipus de valor derivat financer que crea exposició a una inversió mentre redueix el risc i garanteix el capital invertit. Un CPPI és creat amb l'adquisició d'un bo cupó zero, i amb els guanys generats es genera el palancajament. (ca)
- Die Constant Proportion Portfolio Insurance (CPPI) ist eine dynamische Portfolio-Absicherungsstrategie. (de)
- Constant proportion portfolio investment (CPPI) is a trading strategy that allows an investor to maintain an exposure to the upside potential of a risky asset while providing a capital guarantee against downside risk. The outcome of the CPPI strategy is somewhat similar to that of buying a call option, but does not use option contracts. Thus CPPI is sometimes referred to as a convex strategy, as opposed to a "concave strategy" like constant mix. CPPI products on a variety of risky assets have been sold by financial institutions, including equity indices and credit default swap indices. Constant proportion portfolio insurance (CPPI) was first studied by Perold (1986) for fixed-income instruments and by Black and Jones (1987), Black and Rouhani (1989), and Black and Perold for equity instruments. In order to guarantee the capital invested, the seller of portfolio insurance maintains a position in a treasury bonds or liquid monetary instruments, together with a leveraged position in an "active asset", which constitutes the performance engine. Examples of risky assets are a basket of equity shares or a basket of mutual funds across various asset classes. While in the case of a bond+call, the client would only get the remaining proceeds (or initial cushion) invested in an option, bought once and for all, the CPPI provides leverage through a multiplier. This multiplier is set to 100 divided by the crash size (as a percentage) that is being insured against. For example, say an investor has a $100 portfolio, a floor of $90 (price of the bond to guarantee his $100 at maturity) and a multiplier of 5 (ensuring protection against a drop of at most 20% before rebalancing the portfolio). Then on day one, the writer will allocate (5 * ($100 – $90)) = $50 to the risky asset and the remaining $50 to the riskless asset (the bond). The exposure will be revised as the portfolio value changes, i.e., when the risky asset performs and with leverage multiplies by 5 the performance (or vice versa). Same with the bond. These rules are predefined and agreed once and for all during the life of the product. The allocation to the risky asset may vary during the life of the product. In case the active asset performance is negative, the values of the active asset and the CPPI strategy will decrease, and as a result the allocation of the strategy to the active asset will decrease. Should the exposure to the risky asset drop to zero or a very low level, then the CPPI is said to be deleveraged or cashed out. The CPPI strategy will then be fully allocated to the low risk asset until the product matures. CPPI strategies aim at offering a capital protection to its investors. Compared to a bond + call strategy, the drawback of the CPPI is that it follows a buy high sell low strategy. Volatility will hurt the performance of the investment, and once the strategy has deleveraged, it never recovers and the investors have to wait until maturity to receive their initial investments. The benefit is that CPPI protection is much cheaper and less impacted by market movements. A variation of CPPI is the so-called Time Invariant Portfolio Strategy (TIPP) where the capital is (partially) protected continuously (typically on a daily basis) as opposed to a protection at a fixed date in the future. (en)
- Constant Proportion Portfolio Insurance (CPPI) – jedna z technik (strategii) zarządzania portfelem inwestycyjnym. Polega na takiej konstrukcji składu portfela, by zabezpieczać osiągane zyski (w określonym stopniu). Portfel jest tak budowany, by zabezpieczyć go przed spadkiem poniżej osiągniętego już poziomu (ochrona uzyskanego kapitału). Uzyskuje się to przez zmianę proporcji w portfelu instrumentów akcyjnych i obarczonych niskim ryzykiem (z określoną stopą zwrotu – na wskazaną datę). Dla zabezpieczenia coraz większą część portfela stanowią papiery stałodochodowe (istotna jest też duration powiązana z datą, na którą zapewnienie poziomu zysku ma obowiązywać). Zyski na rynku akcji są realizowane jeżeli sytuacja na rynku kapitałowym na to pozwala. Istotny jest poziom ochrony kapitału – zazwyczaj w granicach 90–100%. CPPI pojawiła się na świecie pod koniec XX wieku, a pozytywnie przetestowano ten mechanizm np. w czasie bessy roku 1999 i po atakach 09.2001. W Polsce ta technika jest stosowana przez TFI (w funduszach inwestycyjnych z gwarantowaną stopą zwrotu lub z określanymi poziomami minimalnej wartości na określone daty – okresy 1,5–3 lat) oraz w ramach produktów strukturyzowanych. W przypadku funduszy inwestycyjnych sam fundusz nie gwarantuje osiągnięcia obiecanych zysków, a gwarancji może (odpłatnie) udzielić inny (niż TFI) podmiot, np. ubezpieczyciel, bank lub firma inwestycyjna. (pl)
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