Portfolio Insurance Insurance, insurance

noel

What is the intuition behind: CPPI buys insurance, CM sells insurance?

spartanag07

CPPI CM
Market moves up Buys Equity Sells Equity
Market moves dwn Sells Equity Buys Equity
CPPI is more momentum driven that CM. In CM you are just trying to maintain initial weight of equity and cash. Hope this helps.

jim8z3

I am not sure, but I believe that has to do with slope of the line (plot market value on x axis versus asset value on y axis). THe slope of the line (m) is greater than 1 for CPPI and less than 1 for CM. The reference in this case is how the market is moving. So m greater than 1 is you want to buy/sell more than the rate at which the market is moving at. Since CPPI has m  1 it could be saying it is buying insurance, and m