Constant proportion portfolio insurance - Playing on protection
Constant proportion portfolio insurance (CPPI) techniques have long been used to protect investors' principal on equity-based structured products. However, with some CPPI products performing poorly during the stock market sell-off in May and June, dealers are putting more effort into alternative mechanisms. By Duncan Wood
The big selling point of constant proportion portfolio insurance (CPPI) products has always been the guarantee on investors' principal. So, when global stock markets nosedived in May and June, buyers of these products wouldn't necessarily have been worried about losing their savings. There are other risks, however. Variously dubbed 'cashing out', 'locking out' or 'monetisation' by those in the game, traditional CPPI products come with an inherent risk that the performance component of the
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