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The Performance of Option-Based Portfolio Insurance on a Dividend Payment Stock
Department of Computing, Mathematical and Statistical, University of Namibia, Windhoek, Namibia
Department of Mathematics, University of Botswana, Gaborone, Botswana
Department of Mathematics, University of Botswana, Gaborone, Botswana
- 1 Department of Computing, Mathematical and Statistical, University of Namibia, Windhoek, Namibia
- 2 Department of Mathematics, University of Botswana, Gaborone, Botswana
- 3 Department of Mathematics, University of Botswana, Gaborone, Botswana
Journal of Mathematical Finance·Volume 13 (2023)·Pages 180–190·Published 12 May 2023·DOI10.4236/jmf.2023.132012
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Abstract
Portfolio insurance is a type of hedging which is a dynamic investment strategy that is designed to guarantee the portfolio value at maturity or up to maturity to be greater or equal to a given lower bond (floor). We analyse the efficiency and the performance of option-based portfolio insurance, by employing two strategies to determine the numbers of stocks, put options, bond value and call options in such a way that the floor value is always protected. Furthermore, we compare the insured versus the non-insured portfolio value.
KeywordsPortfolio InsuranceOption-Based Portfolio InsuranceBlack-Scholes ModelEuropean Option
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