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EnglishIn the present paper we study a new exotic option offering participation in a dynamic asset allocation strategy, which is an extension of the well-known Constant Proportion Portfolio Insurance (CPPI) strategy. Our novel approach consists in assuming that the percentage of wealth invested in stocks cannot go under a fixed level, called guaranteed minimum equity exposure (GMEE). In particular, our proposal ensures to overcome the so-called cash-in risk, typically related to a standard CPPI technique, simultaneously guaranteeing the equity market participation. We look deeper into the valuation of call and put options linked to this new CPPI-GMEE strategy. A particular attention is devoted to the analysis of key parameters' value as to gain a better understanding of the sensitivities of the option prices, when changing, for example, the embedded guarantee level. To show the effectiveness of our proposal we provide a detailed computational analysis within theHeston-Vasicek framework, numerically comparing the evaluation of the price of European plain vanilla options when the underlying is either a purely risky asset, a standard CPPI portfolio and a CPPI with GMEE.
Options on constant proportion portfolio insurance with guaranteed minimum equity exposure / Di Persio, Luca; Oliva, Immacolata; Wallbaum, Kai. - In: APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY. - ISSN 1526-4025. - (2020), pp. 1-15. [10.1002/asmb.2547]
| Titolo: | Options on constant proportion portfolio insurance with guaranteed minimum equity exposure | |
| Data di pubblicazione: | 2020 | |
| Autori: | ||
| Stringa autori: | Di Persio, Luca; Oliva, Immacolata; Wallbaum, Kai | |
| Numero degli autori: | 3 | |
| Nazionalità autore: | ITALIA GERMANIA | |
| Lingua: | Inglese | |
| Rivista: | APPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY | |
| Revisione (peer review): | Esperti anonimi | |
| Pagina iniziale: | 1 | |
| Pagina finale: | 15 | |
| Numero di pagine: | 15 | |
| Editore: | Wiley | |
| Digital Object Identifier (DOI): | http://dx.doi.org/10.1002/asmb.2547 | |
| Codice identificativo Scopus: | 2-s2.0-85089000575 | |
| Codice identificativo ISI: | WOS:000555429200001 | |
| Abstract: | In the present paper we study a new exotic option offering participation in a dynamic asset allocation strategy, which is an extension of the well-known Constant Proportion Portfolio Insurance (CPPI) strategy. Our novel approach consists in assuming that the percentage of wealth invested in stocks cannot go under a fixed level, called guaranteed minimum equity exposure (GMEE). In particular, our proposal ensures to overcome the so-called cash-in risk, typically related to a standard CPPI technique, simultaneously guaranteeing the equity market participation. We look deeper into the valuation of call and put options linked to this new CPPI-GMEE strategy. A particular attention is devoted to the analysis of key parameters' value as to gain a better understanding of the sensitivities of the option prices, when changing, for example, the embedded guarantee level. To show the effectiveness of our proposal we provide a detailed computational analysis within theHeston-Vasicek framework, numerically comparing the evaluation of the price of European plain vanilla options when the underlying is either a purely risky asset, a standard CPPI portfolio and a CPPI with GMEE. | |
| Parole Chiave: | CPPI; guaranteed minimum equity exposure; OBPI; option on CPPI; portfolio insurance; stochastic volatility | |
| APC (Article Processing Charges): | no | |
| Note: | Fascia A per SSD SECS/S-06 | |
| Appartiene alla tipologia: | 01a Articolo in rivista |
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http://hdl.handle.net/11573/1434176
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