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A dynamic autoregressive expectile for time-invariant portfolio protection strategies

Authors
Journal
Journal of Economic Dynamics and Control
0165-1889
Publisher
Elsevier
Volume
46
Identifiers
DOI: 10.1016/j.jedc.2014.05.005
Keywords
  • Cppi
  • Expected Shortfall
  • Expectile
  • Quantile Regression
  • Dynamic Quantile Model

Abstract

Abstract “Constant proportion portfolio insurance” is a popular technique among portfolio insurance strategies: the risky part of a portfolio is reallocated with respect to market conditions, via a fixed parameter (the multiple), guaranteeing a predetermined floor. We propose here to use a conditional time-varying multiple as an alternative. We provide the main properties of the conditional multiples for some mainstream cases, including discrete-time rebalancing and an underlying risk asset driven by the Lévy process, while evaluating conditional and unconditional gap risks. Finally, we evaluate the use of a dynamic autoregressive expectile model for estimating the conditional multiple in such a context.

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