Dynamic Multiple Portfolio Gain Insurance Strategy

I have recently developed a principal protection strategy called "Dynamic Multiple Portfolio Gain Insurance".

Compared to the traditional CPPI (Constant Proportion Portfolio Insurance) strategy, it has two features: dynamic multiple and gain protection.

Unlike the CPPI which normally sets the multiple fix at the beginning of the portfolio investing, the DMPGI set the multiple within a range of possible vlaues, conditional on the downside risk of the risky asset. Therefore, it recognizes the essential fact that the risk of the risky underlying asset changes according to market evolutions.

It is also different from the CPPI as the protection level is not based on the beginning value of the portfolio investments but the highest level of the portfolio (gains) throughout the life of the investments, which is appealing to investors who do want to participate in the upside potentials to some extents and do want to lock in those gains.

The following example is based on the S&P/TSX 60 Index and is carried out in the Matlab application.