Option Based Portfolio Insurance Revisited

R. Bouchaib

Annals of Actuarial Science, 2007, vol. 2, issue 2, 195-215

Abstract: In recent years, Constant Proportion Portfolio Insurance (CPPI) has been the most widely recognised form of portfolio insurance among market practitioners, despite a lack of theoretical framework to support it. This paper presents a revised formulation of Option Based Portfolio Insurance (OBPI) and shows, through a case study, how it can be used as a structured product and applied in practice as a dynamic investment strategy for insurance and pensions funds such as with-profits funds. CPPI and the Revised Option Based Portfolio Insurance (ROBPI) technique adopted in this paper are similar in the sense that they rely on dynamic allocation between risky and risk-free assets to provide downside protection. Comparison between the two methods shows that ROPBI is more efficient and forward looking, giving more information about downside risk and producing less volatile asset allocation, which reduces transaction costs and any market impact.

Date: 2007
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:anacsi:v:2:y:2007:i:02:p:195-215_00

Access Statistics for this article

More articles in Annals of Actuarial Science from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().