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Relative performance of dynamic portfolio insurance strategies: Australian evidence
Author(s) -
Huu Do Binh
Publication year - 2002
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/1467-629x.00078
Subject(s) - portfolio insurance , portfolio , downside risk , actuarial science , index (typography) , value (mathematics) , project portfolio management , economics , portfolio optimization , econometrics , computer science , replicating portfolio , financial economics , management , machine learning , project management , world wide web
This paper simulates the performance of synthetic put portfolio insurance and Constant Proportion Portfolio Insurance (CPPI) using Australian data for the period from 1992 to 2000. These strategies are implemented by trading in the index and bills and simulation is conducted across 18 scenarios. We find that while the CPPI dominates in scenarios using daily rebalancing, the synthetic put strategy delivers better outcomes when value based triggers are used. More importantly, although the two per cent market move trigger emerges as the optimal rebalancing choice, overall, neither strategy appears justifiable in terms of achieving downside protection or allowing upside gain.