An Analysis Of Portfolio Insurance Strategies
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Alternative Investments and Strategies
| Author | : Rdiger Kiesel |
| Publisher | : World Scientific |
| Total Pages | : 414 |
| Release | : 2010 |
| Genre | : Business & Economics |
| ISBN | : 9814280100 |
This book combines academic research and practical expertise on alternative assets and trading strategies in a unique way. The asset classes that are discussed include: credit risk, cross-asset derivatives, energy, private equity, freight agreements, alternative real assets (ARA), and socially responsible investments (SRI). The coverage on trading and investment strategies are directed at portfolio insurance, especially constant proportion portfolio insurance (CPPI) and constant proportion debt obligation (CPDO) strategies, robust portfolio optimization, and hedging strategies for exotic options.
Portfolio Insurance - An Analysis of Dynamic Portfolio Insurance Strategies Without Derivatives
| Author | : Sandra Bacher |
| Publisher | : |
| Total Pages | : 88 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
Sowohl die Constant Proportion Portfolio Insurance (CPPI) als auch die Time Invariant Portfolio Protection (TIPP) sind die bekanntesten Beispiele für Portfolio Absicherungsstrategien ohne derivative Instrumente. Da beide Strategien bei Privatinvestoren breite Verwendung finden, ist es von besonderem Interesse durch Studien festzustellen, welche der beiden Strategien die erfolgversprechendere Variante darstellt. Dem kommt besonders in Zeiten fallender Aktienkurse, wie zum Beispiel während der Finanzkrise, erhöhte Bedeutung zu, da gerade zu solchen Zeiten Privatinvestoren eine Absicherung ihrer Postfolios anstreben. Um die Möglichkeiten der CPPI und der TIPP Strategien beurteilen zu können, werden sowohl empirische Untersuchungen durchgeführt als auch auf vorhandene Literatur zurückgegriffen. Der Erfolg der Strategien kann anhand der Ermittlung der Downside Risiken und anhand von Performance Kennzahlen beurteilt werden. Somit ist es auch möglich die Forschungsfrage zu beantworten. Die Ergebnisse zeigen, dass für Privatinvestoren die TIPP Strategie zu bevorzugen ist. Die TIPP Strategie entspricht dem Risikoprofil eines Privatinvestors besser und bietet darüber hinaus eine höhere Qualität der Absicherung.*****The constant proportion portfolio insurance (CPPI) as well as the time invariant portfolio protection (TIPP) are the most prominent examples of portfolio insurance strategies without derivatives. Since both strategies are widely used among private investors it is of particular interest to examine which of the two portfolio insurance strategies is the most promising strategy. This applies especially to periods characterized by falling equity markets like during the financial crisis when private investors specifically seek for protection of their portfolios. In order to investigate the potential of the CPPI and the TIPP strategy an empirical analysis as well as secondary research is used. By calculating downside risk and performance measures the success of the strategies can be examined and the research question can be answered. Results show that the TIPP strategy is favorable for private investors. Moreover the TIPP strategy better fits the risk profile of a private investor and offers higher quality of protection.
An Empirical Analysis of Alternative Portfolio Insurance Strategies in International Asset Management
| Author | : Jot Kai Hong Yau |
| Publisher | : |
| Total Pages | : 390 |
| Release | : 1988 |
| Genre | : Portfolio management |
| ISBN | : |
Encyclopedia of Finance
| Author | : Cheng-Few Lee |
| Publisher | : Springer Science & Business Media |
| Total Pages | : 861 |
| Release | : 2006-07-27 |
| Genre | : Business & Economics |
| ISBN | : 0387262849 |
This is a major new reference work covering all aspects of finance. Coverage includes finance (financial management, security analysis, portfolio management, financial markets and instruments, insurance, real estate, options and futures, international finance) and statistical applications in finance (applications in portfolio analysis, option pricing models and financial research). The project is designed to attract both an academic and professional market. It also has an international approach to ensure its maximum appeal. The Editors' wish is that the readers will find the encyclopedia to be an invaluable resource.
Option-Based Porfolio Insurance. Analysis of Protective Put and Synthetic Put Investment Strategies
| Author | : Felix Lütjen |
| Publisher | : GRIN Verlag |
| Total Pages | : 35 |
| Release | : 2017-07-24 |
| Genre | : Business & Economics |
| ISBN | : 3668490163 |
Bachelor Thesis from the year 2016 in the subject Business economics - General, grade: 1.7, University of Frankfurt (Main), language: English, abstract: Risk aversion is a common trait among investors. While it is possible to reduce risk attributed to specific industries and regions by diversifying among different securities, market risk affects all securities on the market. Even a perfectly diversified portfolio is subject to systematic or market risk. It can be managed through diversification across asset classes, for example by shifting some of the funds invested into risk-free assets. For some investors, this yields unsatisfactory results as the expected return directly decreases linearly with an increase in the position in the risk-free asset. Portfolio insurance (PI) describes an alternative set of strategies that allows investors to reduce their exposure to market risk by guaranteeing the value of the portfolio to be above a certain value at the end of the investment period while allowing for participation in rising stock markets. Option-based portfolio insurance (OBPI) refers to a set of strategies in which either a conventional put option (protective put) or a replicated put option (synthetic put) is used to insure a portfolio against adverse price movements. In theory and assuming perfect market conditions, protective put (PP) and synthetic put (SP) yield identical payoffs and have the same cost. In practice, there are several important differences between the two strategies. On the one hand, PP seems to be an easy and uncomplicated strategy to implement, but the unavailability of listed options with desired maturities and strike prices are major issues. SP strategies, on the other hand, can suffer from obstacles like high transaction costs and jumps in stock prices.
A Bootstrap-Based Comparison of Portfolio Insurance Strategies
| Author | : Hubert Dichtl |
| Publisher | : |
| Total Pages | : 53 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
This study presents a systematic comparison of portfolio insurance strategies. In order to test for statistical significance of the differences in downside performance risk measures between pairs of portfolio insurance strategies, we use a bootstrap-based hypothesis test. Our comparison of different strategies considers the following distinguishing characteristics: static versus dynamic; initial wealth versus cumulated wealth protection; model-based versus model-free; and strong floor compliance versus probabilistic floor compliance. Our results show that the classical portfolio insurance strategies synthetic put and CPPI provide superior downside protection compared to a simple stop-loss trading rule, also resulting in significantly higher Omega ratios. Analyzing more recently developed strategies, neither the TIPP strategy (as an 'improved' CPPI strategy) nor the dynamic VaR-strategy provide significant improvements over the more traditional portfolio insurance strategies. The attractiveness of the dynamic VaR-strategy strongly depends on the quality of the estimates for the required input parameters, in particular, the equity risk premium. However, if an investor possesses superior forecasting skills, other active (market timing) strategies may exist which generate higher (risk-adjusted) returns compared to a protected passive stock market investment.
Portfolio Insurance -- A Comparison of Alternative Strategies
| Author | : Jorge Costa |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 2013 |
| Genre | : |
| ISBN | : |
This study makes a comparison between the most popular strategies of Portfolio Insurance based on Monte Carlo simulation. This work aims to define the best strategy at comparing different strategies and provide a contribution to solving some divergences in literature. Most of the previous comparisons do not take into consideration all the strategies discussed in this study and this analysis intends to add some relevant findings.The OBPI, CPPI and SLPI strategies are evaluated in terms of moments of the distribution, performance ratios (Sharpe ratio, Sortino ratio, Omega ratio and Upside Potential ratio) and stochastic dominance in different market conditions represented by an underlying asset that follows a geometric Brownian motion. In order to have a perception of a real situation in financial markets, the strategies are later also applied to three major stock indices (S&P 500, DJ EuroStoxx 50 and Nikkei 225).We find that CPPI 1 and SLPI strategies should be preferred in all scenarios according to the higher performance ratios, the higher expected returns and other measures. The choice between them is based on the preferences of the investor or manager, but we also find that the CPPI 1 strategy stochastically dominates, on second and third order, the others strategies in bear market scenarios. From our results we can state that a value of 100% for the floor should be preferred in terms of performance ratios, expected returns and other measures. This comparison allows improving the efficiency of decision making of an investor or manager in a Portfolio Insurance investment.
A Risk Management Approach for Portfolio Insurance Strategies
| Author | : Benjamin Hamidi |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2009 |
| Genre | : |
| ISBN | : |
Controlling and managing potential losses is one of the main objective of the Risk Management. Following Ben Ameur and Prigent (2007) and Chen et al. (2008), and extending the first results by Hamidi et al. (2009) when adopting a risk management approach for defining insurance portfolio strategies, we analyze and illustrate a specific dynamic portfolio insurance strategy depending on the Value-at-Risk level of the covered portfolio on the French stock market. This dynamic approach is derived from the traditional and popular portfolio insurance strategy (Cf. Black and Jones, 1987; Black and Perold, 1992): the so-called "Constant Proportion Portfolio Insurance" (CPPI). However, financial results produced by this strategy crucially depend upon the leverage - called the multiple- likely guaranteeing a predetermined floor value whatever the plausible market evolutions. In other words, the unconditional multiple is defined once and for all in the traditional setting. The aim of this article is to further examine an alternative to the standard CPPI method, based on the determination of a conditional multiple. In this time-varying framework, the multiple is conditionally determined in order for the risk exposure to remain constant, even if it also depends upon market conditions. Furthermore, we propose to define the multiple as a function of an extended Dynamic AutoRegressive Quantile model of the Value-at-Risk (DARQ-VaR). Using a French daily stock database (CAC40 and individual stocks in the period 1998-2008), we present the main performance and risk results of the proposed Dynamic Proportion Portfolio Insurance strategy, first on real market data and secondly on artificial bootstrapped and surrogate data. Our main conclusion strengthens the previous ones: the conditional Dynamic Strategy with Constant-risk exposure dominates most of the time the traditional Constant-asset exposure unconditional strategies.
Performance Evaluation of Portfolio Insurance Strategies Using Stochastic Dominance Criteria
| Author | : Jan Annaert |
| Publisher | : |
| Total Pages | : 29 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
The continuing creation of portfolio insurance applications as well as the mixed research evidence suggests that so far no consensus has been reached about the effectiveness of portfolio insurance. Therefore, this paper provides a performance evaluation of the stop-loss, synthetic put and constant proportion portfolio insurance techniques based on a block-bootstrap simulation. Apart from more traditional performance measures, we consider the Value-at-risk and Expected Shortfall of the strategies, which are more appropriate in an insurance context. An additional performance evaluation is given by means of the stochastic dominance framework where we account for sampling error. A sensitivity analysis is performed in order to examine the impact on performance of a change in a specific decision variable (ceteris paribus). The results indicate that a buy-and-hold strategy does not dominate the portfolio insurance strategies at any stochastic dominance order. Moreover, both for the stop-loss and synthetic put strategy a 100% floor value outperforms lower floor values. For the CPPI strategy we find that a higher CPPI multiple enhances the upward potential of the CPPI strategies, but harms the protection level in return. As regards the optimal rebalancing frequency, daily rebalancing should be preferred for the synthetic put and CPPI strategy, despite the higher transaction costs.
