Annals of Operations Research manuscript No. (will be inserted by the editor) Stochastic Dominance of Portfolio Insurance Strategies OBPI versus CPPI

The date of receipt and acceptance will be inserted by the editor Abstract The purpose of this article is to analyze and compare two stan-dard portfolio insurance methods: Option-based Portfolio Insurance (OBPI) and Constant Proportion Portfolio Insurance (CPPI). Various stochastic dominance criteria up to third order are considered. We derive parameter conditions implying the second- and third-order stochastic dominance of the CPPI strategy. In particular, restrictions on the CPPI multiplier resulting from the spread between the implied volatility and the empirical volatility are analyzed