Talk:Constant proportion portfolio insurance

From Wikipedia, the free encyclopedia

Contents

[edit] Needs to be finished - Notes

  • Features: Crash size, guarantee level, initial equity exposure, Relev/Delev-raging triggers, fixed/floating floor, contingent/non-contingent/leverage fees
  • Risk: crash risk, vol risk in the way that a too volatile underlying will rebalance too often if the RL/DL triggers are too close, one not vol enough will never rebalance.
  • Evolution: add contingent coupons, lock in profits to increase the guarantee, target coupon redemption
  • Exotic features: bond + call on a CPPI to replicate exactly the payoff of the CPPI, best of several CPPI, etc.
  • What does it mean that the writer buys a bond and uses the proceeds to get the needed exposure? If I buy a bond, someone else has the proceeds of selling me the bond.

[edit] Too Much Unexplained Jargon

This article is completely illegible to an educated layman (without specific training in finance). The opening sentence reads like a parody of gobbledygook. I realize the use of some jargon is necessary, but this article as it stands is useless to anyone who doesn't already understand the subject matter. --Jonadab, 2007 Oct 26.


[edit] Please review: Bond in CPPI

The article states, in the bond floor section, that the CPPI structure actually contains a bond. This is not correct: The CPPI allocates to a risky asset (underlying) and a risk-free asset, which is (short-term) cash, usually of the same maturity as the rebalancing period (to ensure cash is available, should the CPPI be able to increase risky asset allocation at the next rebalancing). The bond floor itself is of calculatory nature only. The absence of a bond investment in CPPI is indeed a key feature of the structure. Unlike for ZB+C, CPPI market value is (almost) not interest rate sensitive. Actually, CPPI react well to interest rate increases, as the buffer/distance increases with a falling bond floor, and therefore, the structure's risk capacity augments (=> potential for additional future exposure in risky asset). Thanks in advance for considering these aspects in future versions. —Preceding unsigned comment added by 84.73.238.143 (talk) 22:36, 8 November 2007 (UTC)

[edit] IFRS Accounting for CPPI Notes (non synthetic i.e. cash instruments)

Anyone has some ideas, relevant articles...? —Preceding unsigned comment added by 82.173.138.169 (talk) 10:51, 13 January 2008 (UTC)