Post by Sapphire Capital on Aug 21, 2008 22:37:45 GMT 4
Flexible Insurance for Separate Accounts
Ludwig B. Chincarini
Pomona College - Department of Economics; Georgetown University - Robert Emmett McDonough School of Business
The Icfai University Journal of Risk & Insurance, Vol. V, No. 3, pp. 7-30, July 2008
Abstract:
With the advances in technology and lower costs to trading, separate account platforms and online brokers should be able to offer customized portfolio protection to their clients with the click of a button. This paper uses basic concepts from the option literature to show how this insurance could be offered in two convenient forms. In one form, it would represent a straight cash payment by customers, and in another form, investors would exchange a portion of the upside of their returns for the protection. The paper uses the Black-Scholes model to show the benchmark costs associated with this type of protection, as well as performs a simulation with an actual portfolio over various sub-periods from 2000 to 2006.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1162523
Ludwig B. Chincarini
Pomona College - Department of Economics; Georgetown University - Robert Emmett McDonough School of Business
The Icfai University Journal of Risk & Insurance, Vol. V, No. 3, pp. 7-30, July 2008
Abstract:
With the advances in technology and lower costs to trading, separate account platforms and online brokers should be able to offer customized portfolio protection to their clients with the click of a button. This paper uses basic concepts from the option literature to show how this insurance could be offered in two convenient forms. In one form, it would represent a straight cash payment by customers, and in another form, investors would exchange a portion of the upside of their returns for the protection. The paper uses the Black-Scholes model to show the benchmark costs associated with this type of protection, as well as performs a simulation with an actual portfolio over various sub-periods from 2000 to 2006.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1162523