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The Research Of Portfolio Insurance Model

Posted on:2013-09-16Degree:DoctorType:Dissertation
Country:ChinaCandidate:P LiuFull Text:PDF
GTID:1269330428975826Subject:Business management
Abstract/Summary:PDF Full Text Request
Portfolio insurance is characterized by the insurance. It can hedge against the downside risk when the market is down while capture the upside returns when the market goes up. So it is appreciated by the risk averters. Approaching the mechanism of portfolio insurance and the appropriate evaluation criteria plays an important role in understanding and use of portfolio insurance model.In the dissertation, the performances of portfolio insurance are studied first. This paper introduces vlue-at-risk and expected shortfall as the performance evaluation criteria.Those criteria based on the quantile overcome the deficiencies of depending on the normal distribution, such as the variance and Sharpe ratio. Based on Chinese security market data, the performances of portfolio insurance models such as OBPI,CPPI and TIPP are studied under the evaluation criteria such as annual average excess return rate, terminal asset value, VaR and ES and the researches in this dissertation put particular emphasis on the general cases.Meanwhile, Monte Carlo is used to avoid the single path of the history simulation method. And the empirical studies show that the potfolio insurance can avoid the downside risk and catch the chance when market is firm and rising. In the course of my research, the return rates come from Block Bootstrap Sampling and t distribution simulation. Of the two, based on the former, portfolio insurance models such as OBPI, CPPI and TIPP outperform Constant-mix and Buy-and-hold strateges, whereas the case is inverse with respect to the latter.The spectral risk budget insurance portfolio model is introduced because of the limitations of the OBPI model. The first portfolio insurance model OBPI is based on option. The insurance is achieved by the replication of risk-free asset and risky asset in OBPI model. Its premise is that the return rate of securities of risky asset follows the logarithmic normal distribution, that is to say, the price of securities can be described with geometric Brownian motion. But the empirical researchs show that the change of the price in the security market includes the normal price fluctuations which can be described with geometric Brownian motions and the abnormal fluctuations which can be described with the jump motion which makes that t distribution or double exponential distribution can fit the data better. But the risk of jump cannot be eliminated by the portfolio of risky asset and risk-free asset and so the OBPI model is clearly limited.There are two kinds of active risk control:one is hedging, and the other is risk budgeting. OBPI model belongs to the hedging. The paper introduces risk budgeting to control risk for overcoming the limitation of the OBPI model. Risk budgeting is the thought of portfolio management. Instead of return management, it puts more emphasis on risk control. Spectral risk is used as risk budgeting in this paper. Not only is spectral risk coherent risk measure, but it relates to the risk aversion of the investors. VaR and ES are the special cases of spectral risk. Spectral risk budgeting portfolio insurance model is introduced according to the thought of covered risk in the paper based on the spectral risk measure and its performance relates to the risk aversion of the investors. The investor decides to allocate his assets between the risky asset and risk-free asset according to his appetite for risk to avoid downside risk and catch the chance when the market is good.The return rate and volatility will be affected by the existence of the portfolio insurance. And the paper explores it through general equilibrium analysis. During the investors" whole life, prospect theory is introduced to describe their behavior of decision-making and the deadline is the reference of gains and losses. The paper analyses the market of the insurance and non-insurance separately and shows that the existence of the insurance will efficiently decrease the volatility and hence risk premium of the market.
Keywords/Search Tags:portfolio insurance, performance evaluation, spectral risk measure, risk budget, prospect theory
PDF Full Text Request
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