portfolio insurance

Portfolio insurance

A strategy using a leveraged portfolio in the underlying stock to create a synthetic put option. The strategy's goal is to ensure that the value of the portfolio does not fall below a certain level.

Portfolio Insurance

A strategy used to protect against potential losses to a portfolio. For example, one may short sell futures contracts on securities in a portfolio where one makes a profit if the securities decrease in price. Alternatively, one may buy put options allowing one to sell the securities at a predetermined price regardless of market movements. See also: Hedge.

portfolio insurance

The futures or option contracts that serve to offset in whole or in part changes in the value of a portfolio. For example, a portfolio manager might sell short stock-index futures to hedge an expected decline in the market value of a portfolio.
References in periodicals archive ?
The portfolio insurance provisions consist of the following: 77% of the portfolio uninsured with loan-to-value ratios of 80% or lower; 8% of the portfolio privately insured, 8% insured by Rural Development, and 7% securitized mortgage-backed securities.
Portfolio insurance is the primary culprit for what made Black Monday worthy of its name.
New insurance written from portfolio insurance on low loan-to-value mortgages was $1.
Portfolio insurance strategies allow the investor to control downside risk, while benefiting from market rises.
Schwartz, 1988, "Time-Invariant Portfolio Insurance Strategies", Journal of Finance, 43:283-299
They may be retrospective in nature as in loss portfolio insurance or prospective as with prospective aggregate covers.
Among the favorite targets were the futures markets, computerized trading, portfolio insurance, index arbitrage, basket trading, and several other innovations in our capital markets.
The portfolio insurance alone eats up between 2 1/2 and 4 percent of a fund's annual resources.
Risks include: the 21-year maturity of the class III bonds, after which time the class II bonds may be exposed to potential program losses beyond available excess funds; the unseasoned nature of the portfolio of loans; and the possible shifts in the portfolio insurance requirements, allowing for a greater percentage of conventionally-insured mortgages with a potential for higher losses than FHA-insured loans.
Premiums written from portfolio insurance were $78 million, representing an increase of $57 million as compared to the same quarter in the prior year and $61 million compared to the prior quarter primarily due to an increase in new insurance written.
Portfolio insurance allows investors to recover, at maturity, a given percentage of their initial capital.

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