TIPP:Insurance without complexity

Portfolio insurance and prospect theory investors: Popularity and optimal design of capital protected financial products

“…While the CPPI strategy operates with a fixed floor (which is the initial wealth multiplied by the percentage floor), the floor of the TIPP strategy is ratchet up if the value of the portfolio increases. Specifically, after choosing the initial floor and the multiplier, this strategy requires the following steps (Estep and Kritzman, 1988 While the principle idea behind the TIPP strategy seems attractive, Choie and Seff (1989) argue that this strategy suffers from a major shortcoming. As in the traditional CPPI strategy, the TIPP strategy transfers all holdings of the risky asset in an irreversible manner to the risk-free asset once the floor has been reached.…”