constant proportion portfolio insurance

Definition

CPPI. A type of security derivative that creates exposure to an investment while reducing the risk and guaranteeing invested capital. CPPI is created through the purchase of a zero-coupon bond, with the cash proceeds being leveraged. A bond floor is set for the CPPI so that cash flows can be paid, hence guaranteed invested capital.

Related Terms

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Constant Proportion Debt Obligation (CPDO) dynamic asset allocation