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Efficient Pricing of CPPI using Markov Operators
[article]
2009
arXiv
pre-print
Constant Proportion Portfolio Insurance (CPPI) is a strategy designed to give participation in a risky asset while protecting the invested capital. Some gap risk due to extreme events is often kept by the issuer of the product: a put option on the CPPI strategy is included in the product. In this paper we present a new method for the pricing of CPPIs and options on CPPIs, which is much faster and more accurate than the usual Monte-Carlo method. Provided the underlying follows a homogeneous
arXiv:0901.1218v1
fatcat:f5oeww3nlvbmjgwjutgeygk6lq