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A Dynamic Inflation Hedging Trading Strategy Using a CPPI

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  • Fulli-Lemaire, Nicolas

Abstract

This article tries to solve the portfolio inflation hedging problem by introducing a new class of dynamic trading strategies derived from classic portfolio insurance techniques adapted to the real world. These strategies aim at yielding higher returns on a risk-adjusted basis than regular inflation hedging portfolio allocation while achieving a lower cost than comparable option-based guaranteed real value strategies.

Suggested Citation

  • Fulli-Lemaire, Nicolas, 2012. "A Dynamic Inflation Hedging Trading Strategy Using a CPPI," MPRA Paper 42851, University Library of Munich, Germany, revised 13 Nov 2012.
    • Handle: RePEc:pra:mprapa:42851
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    File URL: https://mpra.ub.uni-muenchen.de/43620/3/MPRA_paper_43620.pdf
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    References listed on IDEAS

    as
    1. Courtland L. Washburn & Clark S. Binkley, 1993. "Do Forest Assets Hedge Inflation?," Land Economics, University of Wisconsin Press, vol. 69(3), pages 215-224.
    2. Marie Brière & Ombretta Signori, 2011. "Inflation hedging portfolios in different regimes," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 139-163, Bank for International Settlements.
    3. Andrew Ang & Geert Bekaert & Min Wei, 2008. "The Term Structure of Real Rates and Expected Inflation," Journal of Finance, American Finance Association, vol. 63(2), pages 797-849, April.
    4. Michael J. Brennan & Yihong Xia, 2002. "Dynamic Asset Allocation under Inflation," Journal of Finance, American Finance Association, vol. 57(3), pages 1201-1238, June.
    5. Fisher, Irving, 1907. "The Rate of Interest," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number fisher1907.
    6. Leland, Hayne E, 1980. "Who Should Buy Portfolio Insurance?," Journal of Finance, American Finance Association, vol. 35(2), pages 581-594, May.
    7. Bodie, Zvi, 1976. "Common Stocks as a Hedge against Inflation," Journal of Finance, American Finance Association, vol. 31(2), pages 459-470, May.
    8. Dimitris Politis & Halbert White, 2004. "Automatic Block-Length Selection for the Dependent Bootstrap," Econometric Reviews, Taylor & Francis Journals, vol. 23(1), pages 53-70.
    9. Mr. Shaun K. Roache & Alexander P. Attie, 2009. "Inflation Hedging for Long-Term Investors," IMF Working Papers 2009/090, International Monetary Fund.
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    Cited by:

    1. Fulli-Lemaire, Nicolas, 2013. "Alternative inflation hedging strategies for ALM," MPRA Paper 43755, University Library of Munich, Germany.
    2. Fulli-Lemaire, Nicolas, 2012. "Alternative Inflation Hedging Portfolio Strategies: Going Forward Under Immoderate Macroeconomics," MPRA Paper 42854, University Library of Munich, Germany.

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    More about this item

    Keywords

    ALM; Inflation Hedging; Portfolio Insurance; CPPI;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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