In a constant proportion strategy, if 'm' is greater than 1, what is this strategy referred to as?

In a constant proportion strategy, when the measure 'm' is greater than 1, it refers to a dynamic investment approach known as constant proportion portfolio insurance (CPPI). This strategy involves maintaining a specific equity exposure that increases with the upward movement of the portfolio value, allowing for the preservation of capital while participating in equity market gains.

In CPPI, the investor uses a multiplier (m), which determines how much risk to take based on the available cushion in the portfolio—the difference between the current portfolio value and a predetermined floor value. A multiplier greater than 1 indicates that the investor is adopting an aggressive stance, amplifying exposure to equities as the portfolio grows, while systematically reducing exposure as the portfolio declines in value. This characteristic makes CPPI distinct from other strategies listed, as it incorporates a mechanism for dynamic adjustment based on market conditions and portfolio performance, aiming to safeguard against downside risk while still capturing upside potential.

Other strategies mentioned, such as buy and hold, constant mix, and fixed asset allocation, do not involve the dynamic adjustment of equity exposure relative to the portfolio's performance in the same way that CPPI does, focusing instead on a more static or passive asset allocation approach.