 A performance evaluation of portfolio insurance under the Black and Scholes framework: An application of the economic index of riskinessRichard Lu, Tzyy-Leng Horng, Min-Sun Horng and Amy Z.-H. Wang The Quarterly Review of Economics and Finance, 2023, vol. 89, issue C, 269-276 Abstract: The investment performance of an option-based portfolio insurance strategy is compared with a buy-and-hold strategy under the Black and Scholes framework. Under this setup, we can derive the return distributions for the portfolio insurance and buy-and-hold strategies. According to the economic performance measure, which generalizes the Sharpe measure, the portfolio insurance with no transaction costs almost outperforms buy-and-hold in all scenarios studied. Further, if the percent of principal protected is chosen optimally, the portfolio insurance is better than buy-and-hold. Although the portfolio insurance loses some ground for short investment horizons with transaction costs, the portfolio insurance performs relatively well for long investment horizons. Keywords: Portfolio insurance; Economic Index of riskiness; Aumann-serrano index; Economic performance measure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:89:y:2023:i:c:p:269-276 DOI: 10.1016/j.qref.2023.04.003 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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