Authors : Jiah-Shing Chen and Benjamin Penyang Liao
Abstract: Traditional Portfolio Insurance (PI) strategy, such as CPPI, only considers the floor constraint but not the goal aspect. This paper proposes a Goal-Directed (GD) strategy to express an investor`s goal-directed trading behavior and combines this floor-less GD strategy with the goal-less CPPI strategy to form a piecewise linear goal-directed CPPI (GDCPPI) strategy. This paper applies Genetic Algorithm (GA) technique to find better piecewise linear GDCPPI strategy parameters than those under the Brownian motion assumption. The statistical tests show that the GA strategy can outperform the Brownian strategy.
Jiah-Shing Chen and Benjamin Penyang Liao , 2006. Piecewise Linear Goal-Directed CPPI Strategy. Asian Journal of Information Technology, 5: 720-724.