Portfolio insurance strategy in the cryptocurrency market

Hyungjin Ko, Bumho Son and Jaewook Lee

Research in International Business and Finance, 2024, vol. 67, issue PA

Abstract: In this study, we perform a comparative analysis of portfolio insurance strategies for the cryptocurrency market. We examine performance evaluation regarding the various downside risks under different economic conditions and explore the impact of investors’ utility based on Expected Utility and Prospect Theory. We confirm evident economic gains using portfolio insurance in the cryptocurrency market and demonstrate reduced downside risks with a higher Omega ratio, implying reasonable risk-managed profit compared to buy-and-hold. Most importantly, portfolio insurance provides opportunities for a higher utility in cryptocurrency than in the traditional stock market, indicating a greater economic value of portfolio insurance.

Keywords: Cryptocurrency; Portfolio insurance strategy; Downside risk; Expected utility theory; Prospect theory (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:67:y:2024:i:pa:s0275531923002611

DOI: 10.1016/j.ribaf.2023.102135

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