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Discrete Dynamics in Nature and Society
Volume 2014, Article ID 260484, 7 pages
Research Article

Model for Dynamic Multiple of CPPI Strategy

1School of Finance and Economics, Xi’an Jiaotong University, Xi’an 710061, China
2Financial Market Department, Bank of Xi’an, Xi’an 710075, China
3School of Management, Xi’an Jiaotong University, Xi’an 710049, China

Received 13 March 2014; Accepted 28 May 2014; Published 24 June 2014

Academic Editor: Chuangxia Huang

Copyright © 2014 Guangyuan Xing et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


Focusing on the parameter “Multiple” of CPPI strategy, this study proposes a dynamic setting model of multiple for gap risk management purpose. First, CPPI gap risk is measured as the probability that the value loss of active asset exceeds its allowed maximum drop determined by a given multiple setting. Moreover, according to the statistical estimation using SV-EVT approach, a dynamic choice of multiple is detailed as a function of time-varying asset volatility, expected loss, and the possibility of occurrence of extreme events in the active asset returns illustrated empirically on Shanghai composite index data. This study not only enriches the literature of dynamic proportion portfolio insurance, but also provides a practical reference for CPPI investors to choose a moderate risky exposure achieving gap risk management, which promotes CPPI’s application in emerging capital market.