Goal-Directed Dynamic Portfolio Insurance Strategies Research

Depending on decentralized investment the investor can efficiently avoid non-systemic risk but not systemic risk. Systemic risk would be hugely harmful to the mutual guarantee funds and social security funds which always have special demand of risk and return. Portfolio Insurance Strategies offer to solve the above problem in both theory and techniques. Traditional Portfolio Insurance Strategies can satisfy the demand of risk but not return. In order to achievement the investment goal, wedeveloped a new strategy named Goal-Directed Dynamic Portfolio Insurance Strategies (GD-DPIS), which includes Goal-Directed Constant Proportion Portfolio Insurance Strategy (GDCPPI) and Goal-Directed Time-Invariant Portfolio Protection Strategy (GDTIPP). The basic principle of GD-DPIS is when not yet get to the goal return GD-DPIS take the attitude of the low wealth risk aversion, once get over the goal return GD-DPIS take the attitude of the high wealth risk aversion.The empirical study shows that in the long and short market the performance of GD-DPIS is better than the traditional strategies. If allowed to buy short and sell short, GD-DPIS will even exceed the market performance. In the shake market GD-DPIS can get the stable income, but its performance due to its parameter option. On the other hand, in the short and shake market GD-DPIS can ensure the safety of the floor and it would not be affected by whether there is buy short and sell short condition.Monte Carlo simulation study shows that both GDCPPI and GDTIPP can ensure the safety of the floor. The higher expected return and riskless rate are, the better their performance are. When the expected return is positive, their performance is negative related to the fluctuation rate, and the better one is GDCPPI. When the expected return is negative, GDCPPI performance is still negative related to the fluctuation rate when GDTIPP is on the opposite, and GDTIPP is the better one. When the expected return is zero their performance is negative related to the fluctuation rate, and the better one is GDTIPP.The main research work in the paper includes following contents. After thinking about the shortage of traditional Portfolio Insurance Strategy, we develop CPPI strategy and TIPP strategy, and advance Goal-Directed Dynamic Portfolio Insurance Strategies based on the theory of risk attitude. Then using historical data we compare the performance of GD-DPIS with that of traditional Portfolio Insurance Strategy. Finally, through Monte Carlo simulation study we analyze the factors which influence the performance of GD-DPIS and suggest how to operate on the GD-DPIS.