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Growth Optimal Portfolio Insurance For Long-Term Investors

We solve for the growth-rate optimal multiplier of a portfolio insurance strategy in the general case with a locally risky reserve asset and stochastic state variables. The level of the optimal tim ...

Author(s) :

Daniel Mantilla-García

Summary :

We solve for the growth-rate optimal multiplier of a portfolio insurance strategy in the general case with a locally risky reserve asset and stochastic state variables. The level of the optimal time-varying multiplier turns out to be lower than the standard constant multiplier of CPPI for common parameter values. As a consequence the outperformance of the growth-optimal portfolio insurance strategy (GOPI) does not come with higher risk. A revisited version of this paper is forthcoming in the Journal of Investment Management.

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Type : Working paper
Date : 07/04/2014
Keywords :

Portfolio Management