Equity portfolio insurance against a benchmark: Setting, replication and optimality

Hamza Bahaji
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Hamza Bahaji: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper undertakes the issue of portfolio insurance from the perspective of a risk-averse agent requiring his financial wealth to grow at a floored rate in excess of an equity benchmark. The suggested solution is a generalization of the CPPI approach within a two-equity asset framework. The paper examines some features of this extension related to its dynamic, its relative risk-reward profile and its static replication. It focuses more specifically on the optimal design of this portfolio strategy in the sense of consumption-investment decision making.

Keywords: Portfolio insurance; Equity benchmark; Perpetual exchange options; Utility maximization (search for similar items in EconPapers)
Date: 2014-06
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Citations: View citations in EconPapers (2)

Published in Economic Modelling, 2014, 40, ⟨10.1016/j.econmod.2013.11.031⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01455395

DOI: 10.1016/j.econmod.2013.11.031

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