Performance Evaluation Of Optimized Portfolio Insurance Strategies
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Performance Evaluation of Portfolio Insurance Strategies
| Author | : Dima Tawil |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
This thesis is set out with the objective of evaluating and comparing the performance of portfolio insurance strategies. We try to figure out when and why one portfolio insurance strategy should be preferred by investors in practice. To meet this objective, main portfolio insurance strategies (OBPI, CPPI, Synthetic put and Stop-loss) are compared relatively to each other and to some benchmark strategies. Portfolio insurance strategies are applied within different implementation scenarios and compared according to various criteria that include:1. The payoff functions, stochastic dominance, the level of protection and the cost of insurance under bull and bear market conditions. 2. Various risk adjusted performance measures that reflect different investors' preferences toward risk and return. 3. The preferences of investors who act according to cumulative prospect theory (CPT). Our results reveal a dominant role of CPPI strategy at the majority of cases and according to the majority of comparison criteria.
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.
Portfolio Optimization and Performance Analysis
| Author | : Jean-Luc Prigent |
| Publisher | : CRC Press |
| Total Pages | : 451 |
| Release | : 2007-05-07 |
| Genre | : Business & Economics |
| ISBN | : 142001093X |
In answer to the intense development of new financial products and the increasing complexity of portfolio management theory, Portfolio Optimization and Performance Analysis offers a solid grounding in modern portfolio theory. The book presents both standard and novel results on the axiomatics of the individual choice in an uncertain framework, cont
Portfolio Insurance and VaRoP. A Comparison
| Author | : Ralf Hohmann |
| Publisher | : GRIN Verlag |
| Total Pages | : 23 |
| Release | : 2021-05-18 |
| Genre | : Business & Economics |
| ISBN | : 334640868X |
Scientific Essay from the year 2021 in the subject Business economics - Investment and Finance, , language: English, abstract: Investments in money and capital markets involve different loss potentials that market participants should be able to manage. Below follows an overview and comparison of selected strategies to manage these risks. Portfolio insurance (PI) strategies were developed in the 1980s. They are used to hedge portfolios or individual investments against price losses. The volume of assets hedged with these strategies is significant. Different forms of individual strategies have developed over the years. Risk quantification and Value at Risk (VAR) strategies emerged around the same time. Risks of individual investments or portfolios were measured and different strategies were developed to take them into account in Value at Risk optimised portfolios (VaRoP). VaRoP is a strategy that calculates an optimal portfolio taking into account a given or permissible maximum VAR. Both strategies are intended to protect portfolios from losses in value. Their similarities and differences as well as their successes are presented and summarised in this paper. Their applicability in practice is also examined.
Performance of Portfolio Insurance Strategies
| Author | : Yu Zhu |
| Publisher | : |
| Total Pages | : 54 |
| Release | : 1987* |
| Genre | : Investment guaranty insurance |
| ISBN | : |
Optimization of CPPI Strategies
| Author | : Luca Bruschetti |
| Publisher | : |
| Total Pages | : |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
Focusing on CHF investors, the present Master thesis carries out an optimization of Constant Proportion Portfolio Insurance products in terms of multiple, floor and trading filter, while at the same time tackling the issue of negative interest rates. In a CPPI setup, negative interest rates cause the problem of portfolio value trespassing the level of guaranteed wealth at maturity even once the risk exposure has been completely eroded and the portfolio is entirely invested in a risk-free asset after a sustained period of market correction. As such, while in standard CPPI theory the risk-free asset is thought to correspond to call money market deposits, here we propose a different underlying, namely a CHF denominated ETF, tracking the performance of long-term Swiss Governmental Bonds. Having introduced CPPI strategies both from a theoretical and a mathematical point of view, we adopt a block-bootstrapping approach in order to create 500 paths for both the risky and risk-free component to be used as underlying for CPPI simulation. We take different performance and risk measures into account and finally try to identify and select the possibly best setup(s) for Swiss market investors. We argue that within all possible combinations of floor, multiple and trading filter considered here, the class of strategies with a multiple within [4;6], a floor in the range [91;94] and a 10% (exposure linked) trading filter is best suited for CHF investors with different risk appetites and willing to be exposed to the Swiss equity market. Finally, we show that the revised CPPI setup, as proposed in the paper, might be considered as a valuable alternative for standard CPPI products in an market environment where negative deposit rates are prevailing.
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.
Performance of Portfolio Insurance Strategies
| Author | : Hakan Er |
| Publisher | : |
| Total Pages | : |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
In this study, we compare the performances of the two standard portfolio insurance methods: the Option Based Portfolio Insurance (OBPI) and the Constant Proportion Portfolio Insurance (CPPI). In prior works, data on many established markets were utilised to investigate this issue. There have also been many empirical studies of portfolio insurance (PI) utilising emerging market data. However, we are not aware of an application PI on Turkish data. This is where our study contributes to PI literature. We use a data set that covers the Istanbul Stock Exchange 30 (ISE-30) stocks, from 1.3.1997 to 29.8.2008. Our main finding is that the implementation of PI (especially CPPI) enhances portfolio performance.
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.
