Stochastic dominance of portfolio insurance strategies

  title={Stochastic dominance of portfolio insurance strategies},
  author={Rudi Zagst and Julia Kraus},
  journal={Annals of Operations Research},
  • R. Zagst, Julia Kraus
  • Published 1 May 2011
  • Economics, Computer Science
  • Annals of Operations Research
The purpose of this article is to analyze and compare two standard portfolio insurance methods: Option-based Portfolio Insurance (OBPI) and Constant Proportion Portfolio Insurance (CPPI). Various stochastic dominance criteria up to third order are considered. We derive parameter conditions implying the second- and third-order stochastic dominance of the CPPI strategy. In particular, restrictions on the CPPI multiplier resulting from the spread between the implied volatility and the empirical… Expand

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