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Equity portfolio insurance against a benchmark: Setting, replication and optimality

Author

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  • Hamza Bahaji

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper undertakes the issue of portfolio insurance from the perspective of a risk-averse agent requiring his financial wealth to grow at a floored rate in excess of an equity benchmark. The suggested solution is a generalization of the CPPI approach within a two-equity asset framework. The paper examines some features of this extension related to its dynamic, its relative risk-reward profile and its static replication. It focuses more specifically on the optimal design of this portfolio strategy in the sense of consumption-investment decision making.

Suggested Citation

  • Hamza Bahaji, 2014. "Equity portfolio insurance against a benchmark: Setting, replication and optimality," Post-Print hal-01455395, HAL.
    • Handle: RePEc:hal:journl:hal-01455395
    DOI: 10.1016/j.econmod.2013.11.031
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    Cited by:

    1. Zagst, Rudi & Kraus, Julia & Bertrand, Philippe, 2019. "Option-Based performance participation," Journal of Banking & Finance, Elsevier, vol. 105(C), pages 44-61.
    2. Hentati-Kaffel, Rania, 2016. "Structured products under generalized kappa ratio," Economic Modelling, Elsevier, vol. 58(C), pages 599-614.

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