Time-Invariant Portfolio Insurance Strategies

Authors

  • MICHAEL J. BRENNAN,

  • EDUARDO S. SCHWARTZ

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    • Both authors from Anderson Graduate School of Management, University of California, Los Angeles. We would like to thank Fischer Black, an anonymous referee, and the participants in the Finance Workshops at U.C. Berkeley and the University of British Columbia and the European Finance Association Meetings in Madrid for their helpful comments on this paper. This research was supported in part by a grant from Leland, O'Brien, Rubinstein Associates.

ABSTRACT

This paper characterizes the complete class of time-invariant portfolio insurance strategies and derives the corresponding value functions that relate the wealth accumulated under the strategy to the value of the underlying insured portfolio. Time-invariant strategies are shown to correspond to the long-run policies for a broad class of portfolio insurance payoff functions.

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