Optimization of Portfolio Insurance Strategies

Project: National Science and Technology CouncilNational Science and Technology Council Academic Grants

Project Details


Portfolio insurance strategies control the risk of a portfolio within a certain level. While protecting the asset value from being below a predefined bottom, portfolio insurance strategies also engage in aggressive profiting. Portfolio insurance strategies can be categorized into Option Based Portfolio Insurance and dynamic portfolio insurance such as Constant Proportion Portfolio Insurance (CPPI) and Time-Invariant Portfolio Protection (TIPP). The simplicity and flexibility of CPPI and TIPP have made them representative of contemporary portfolio insurance strategy. In the decision-making of a portfolio insurance problem, the investor must select the target asset or portfolio before determining the multiplier and in turn the risk position. Current studies assume that the multiplier is a function of portfolio return and risk, and even market factors. Seemingly, all studies overlook the effects of portfolio selection upon the performance of a portfolio insurance strategy. Admittedly, every portfolio has an optimal multiplier, but does every combination of a portfolio with corresponding optimal multiplier lead to the same performance? If so, any portfolio can be selected to deliver the same performance. However, this is apparently impossible. Therefore, the performance of an insurance strategy still depends on the selection of portfolio, and the selections of portfolio and multiplier are not independent. They must be determined at the same time to maximize the investment profit. In other words, there exists an optimal portfolio insurance strategy in a specific market. This study intends to concurrently determine the optimal portfolio and optimal multiplier by using mathematical programming and genetic algorithm, to investigate their applicability, and to compare their performance and adaptability to market changes with existing methods.

Project IDs

Project ID:PB10106-0242
External Project ID:NSC101-2410-H182-003
Effective start/end date01/08/1231/07/13


  • Portfolio insurance strategy
  • Constant Proportion Portfolio Insurance
  • Time-Invariant Portfolio Protection
  • Portfolio Selection
  • Multiplier


Explore the research topics touched on by this project. These labels are generated based on the underlying awards/grants. Together they form a unique fingerprint.