Model for Dynamic Multipliers of CPPI Strategy

Abstract

The objectives of the study were: 1) to find dynamic multiplier of CPPI strategy for gap risk management which is measured as the probability that the value loss of portfolio is not leaser than acceptable maximum loss at risk level as 0.01 in the last day of investment by using GARCH(1,1) and extreme value theory (EVT) for determining multiplier with gap risk management and 2) to compare the ability of risk insurance of dynamic multiplier of CPPI strategy along with control gap risk with  constant multiplier of CPPI strategy over period of investment. 

The results of study indicated that dynamic multiplier strategy along with control gap risk  at  risk level  0.01 can  guarantee that the portfolio value is not leaser than the minimum  acceptable value, whereas the constant multiplier strategy over period of investment cannot guarantee portfolio value in some multiplier.