Portfolioabsicherung mit konstanter Indexpartizipation

Manuel Ammann and Heinz Zimmermann

Swiss Journal of Economics and Statistics (SJES), 1998, vol. 134, issue IV, pages 499-526

Abstract: Asymmetric portfolio insurance strategies have become increasingly popular in practice. We show that a combination of investments in bonds and call options allows for more flexible strategies than the traditional portfolio insurance based on investments in put options and their underlying security. In this article we focus on strategies which, for an exogenously given floor level, guarantee investors a constant rate of participation in price changes of the underlying security - i.e., the rate of participation of the insurance strategy in the return on the underlying security is independent of the actual return on the underlying. We show how to compute the strike price of the call option such that a constant target participation rate is obtained. Furthermore, in a sensitivity analysis, we investigate attainable constant participation rates for various parameter scenarios. Finally, we compare insurance strategies which involve rolling over option positions with simple static strategies.

Date: 1998

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