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Before delving into the topic of discrete rebalancing, I describe the trading policy induced by cppi products. I stay within the context of the two assets model, i.e. cash (with zero interest rate) plus a risky asset. As usual, the risky asset is initialized with price \(p=1\). Portfolios are initialized with one dollar.  Consider a portfolio which trades so as to keep the proportion of the risky asset at \(0 \lt \pi \lt 1\). A cppi overlay consists in protecting a certain level \(\underline{p}\) with I choose to set at \(1/2\) for illustration. I'll assume that the exposure to the risky asset is decreased linearly from \(\pi\) at \(p=1\) to zero at \(p=1/2\). This gives the following exposure to the portfolio:  \[\pi(p)=\pi-2(1-p),\, 1/2 \lt  p \lt 1,\] \[\pi(p)=\pi,\, p \geq 1.\]  I give the calculations below, but the next two graphs illustrate the results. As is clear from the graphs (and intuitively obvious), the trading policy is contrarian for \(p \geq 1\) and momentum for \(p \le 1\). Downside protection forces to sell the asset when its price has gone down, and to buy it when it has gone up.