Chapter 24: Portfolio Insurance and Synthetic Options

The following sections are included:

• Introduction

• Basic Concepts of Portfolio Insurance

• Strategies and Implementation of Portfolio Insurance

  • Stop-loss orders

  • Portfolio insurance with listed put options

  • Portfolio insurance with synthetic options

  • Portfolio insurance with dynamic hedging

• Comparison of Alternative Portfolio-Insurance Strategies

  • Synthetic options

  • Listed put options

  • Dynamic hedging and listed put options

• Empirical Studies of Portfolio Insurance

  • Leland (1985)

  • Asay and Edelsburg (1986)

  • Eizman (1986)

  • Rendleman and McEnally (1987)

  • Garcia and Gould (1987)

  • Zhu and Kavee (1988)

  • Perold and Sharpe (1988)

  • Rendleman and O’Brien (1990)

  • Loria, Pham, and Sim (1991)

  • Do and Faff (2004)

  • Cesari and Cremonini (2003)

  • Herold, Maurer, and Purschaker (2005)

  • Hamidi, Jurczenko, and Maillet (2007)

  • Ho, Cadle, and Theobald (2008)

• Summary