Lakshmi Y, Ajay R, Uday Kumar Jagannathan
firstname.lastname@example.org , email@example.com
Lakshmi Y, Ajay R, Uday Kumar Jagannathan
Faculty of Management and Commerce, Ramaiah University of Applied Science, Gnanagangothri Campus, M S R Nagar, Bengaluru -560054, Karnataka, INDIA.
Volume - 11,
Issue - 2,
Year - 2020
Portfolio Insurance Strategies are the investment strategies used by the investors to avoid their losses by using various financial instruments such as equites and debts and derivative are combined in such a way that degradation of portfolio value is protected. It is a dynamic hedging strategy which uses stock index. It implies buying and selling securities periodically to maintain limit of the portfolio value. The working of portfolio insurance is similar to buying an index put option and can also be done by using listed index options. Due to the possibility of gaining advantages from these strategies, investor can opt these strategies according to the market conditions to maximize their returns. The study focuses on eight Portfolio Insurance Strategies: Synthetic Call, Covered Call, Long Combo, Synthetic Put, Covered Put, Long Straddle, Short Straddle, Long Strangle Strategies, these strategies can be called Portfolio Insurance Strategies because of their nature of investment and returns. The objectives of the study to analyze the risk and return associated with these strategies on 5 years historical data of Nifty 50 and formulated hypothesis to know impact of variables such as Risk, Volatility, Degree of Risk. The study Concluded that Insurance Portfolio Strategies are more beneficial for the investors who uses them according to the market conditions.
Cite this article:
Lakshmi Y, Ajay R, Uday Kumar Jagannathan. A Study on Portfolio Insurance Strategies on Indian Equity (Nifty 50). Asian Journal of Management. 2020;11(2):154-160. doi: 10.5958/2321-5763.2020.00024.4
Lakshmi Y, Ajay R, Uday Kumar Jagannathan. A Study on Portfolio Insurance Strategies on Indian Equity (Nifty 50). Asian Journal of Management. 2020;11(2):154-160. doi: 10.5958/2321-5763.2020.00024.4 Available on: https://ajmjournal.com/AbstractView.aspx?PID=2020-11-2-4
1. Ahn, D.H., Boudoukh, J., Richardson, M. and Whitelaw, R.F., 2012. Optimal risk management using options. The Journal of Finance, 54(1), pp.359-375.
2. Ameur, H.B. and Prigent, J.L., 2016. Portfolio Insurance: determination of a dynamic CPPI multiple as function of state variables. Thema University of Cergy, Working paper.
3. Annaert, J., Van Osselaer, S. and Verstraete, B., 2014. Performance evaluation of portfolio insurance strategies using stochastic dominance criteria. Journal of Banking and Finance, 33(2), pp.272-280.
4. Basak, S., 2015. A general equilibrium model of portfolio insurance. The Review of Financial Studies, 8(4), pp.1059-1090.
5. Bertrand, P. and Prigent, J.L., 2011. Portfolio insurance strategies: OBPI versus CPPI.
6. Brennan, M.J. and Solanki, R., 2014. Optimal portfolio insurance. Journal of financial and quantitative analysis, 16(3), pp.279-300.
7. Bookstaber, R. and Langsam, J.A., 2018. Portfolio insurance trading rules. The Journal of Futures Markets (1986-1998), 8(1), p.15.
8. Choie, K.S. and Seff, E.J., 2012. TIPP: Insurance without complexity: Comment. Journal of Portfolio Management, 16(1), p.107.
9. Cont, R. and Tankov, P., 2012. Constant proportion portfolio insurance in the presence of jumps in asset prices. Mathematical Finance: An International Journal of Mathematics, Statistics and Financial Economics, 19(3), pp.379-401.
10. Dash, M. and Goel, A., 2014. A Comparison of ITM and OTM Protective-Puts and Covered-Calls. Asian Journal of Finance and Accounting, 6, pp.126-137.
11. Estep, T. and Kritzman, M., 2013. TIPP: Insurance without complexity. Journal of Portfolio Management, 14(4), p.38.
12. Hamidi, B., Maillet, B.B. and Prigent, J.L., 2013, December. A risk management approach for portfolio insurance strategies. In Proceedings of the 1st EIF International Financial Research Forum, Economica.
13. Keppo, J., Meng, X., Shive, S. and Sullivan, M., 2013. Modelling and hedging options under stochastic pricing parameters. Proceedings of the Industrial and Operations Engineering.
14. Knopf, J.D., Nam, J. and Thornton Jr, J.H., 2012. The volatility and price sensitivities of managerial stock option portfolios and corporate hedging. The Journal of Finance, 57(2), pp.801-813.
15. Lehman, R. and McMillan, L.G., 2011. Options for Volatile Markets: Managing Volatility and Protecting Against Catastrophic Risk (Vol. 143). John Wiley and Sons.
16. Leland, H.E., 1980. Who should buy portfolio insurance?. The Journal of Finance, 35(2), pp.581-594.
17. Lee, H.I., Hsu, H. and Chiang, M.H., 2010. Portfolio insurance with a dynamic floor. Journal of Derivatives and Hedge Funds, 16(3), pp.219-230.
18. Leland, H.E. and Rubinstein, M., 2017. The evolution of portfolio insurance.
19. Madura, J. and Tucker, A.L., 2015. Hedging international stock portfolios: lessons from the 1987 crash. Journal of Portfolio Management, 18(3), p.69.
20. Morard, B. and Naciri, A., 2016. Options and investment strategies. The Journal of Futures Markets (1986-1998), 10(5), p.505.
21. Prigent, J.L. and Bertrand, P., 2013. Portfolio insurance strategies: a comparison of standard methods when the volatility of the stock is stochastic. International Journal of Business, 8(4).
22. Rubinstein, M., 2015. Portfolio insurance and the market crash. Financial Analysts Journal, 44(1), pp.38-47.
23. Rubinstein, M., 2015. Alternative paths to portfolio insurance. Financial Analysts Journal, 41(4), pp.42-52.
24. S. Kim, 2013. Portfolio Insurance: determination of a dynamic CPPI multiple as function of state variables. Thema University of Cergy, Working paper.
25. Xing, G., Xue, Y., Feng, Z. and Wu, X., 2014. Model for dynamic multiple of CPPI strategy. Discrete Dynamics in Nature and Society, 2014.
26. Zhu, Y. and Kavee, R.C., 2017. Performance of portfolio insurance strategies. Journal of Portfolio Management, 14(3), p.48.