Summary: | 碩士 === 國立中興大學 === 財務金融系所 === 96 === In order to find the characteristic and operation of portfolio insurance strategies, this paper applies the principle of Constant Proportion Portfolio Insurance (CPPI) and Time-Invariant Portfolio Protection (TIPP) replication to the Taiwan Stock Market. For each strategy, some measures (average return, standard deviation and opportunity cost) are calculated to compare its performance, and focuses on the impacts of controllable factors, such as floor return, protection horizon and portfolio risk multiplier(M) on the performance and the cost of portfolio insurance, which can be measured by the reduction of long-run arithmetic or geometric average return and the loss of upside captures. Besides, these strategies are compared in different market situations (Taiwan Stock Market from 1988 to 2007) taking into transaction costs and risk-free interest.
The results of historical simulations indicate that the performance of implementing portfolio insurance in the Taiwan Stock market can excess return relative to the buy-and-hold (uninsured) strategy if the time horizon of portfolio insurance is one year. However, it’s always has some loss of upside captures (opportunity cost ) for each strategy.
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