Portfolio insurance on a large share portfolio is most typically performed using a strategy involving:

A) buying index futures
B) selling LEPOs
C) buying index put options
D) selling index-linked bonds

Question

Portfolio insurance on a large share portfolio is most typically performed using a strategy involving:

A) buying index futures
B) selling LEPOs
C) buying index put options
D) selling index-linked bonds

Quizplus · Accepted Answer

Buying index put options is the most commonly used strategy for portfolio insurance as it allows investors to protect their share portfolio against a decline in the market. By purchasing put options, investors can limit potential losses on their portfolio while still participating in any potential upside. Buying index futures or selling LEPOs are also possible strategies, but they involve greater risk as they require forecasting future market movements. Selling index-linked bonds is not a typical strategy for portfolio insurance.

Portfolio Insurance on a Large Share Portfolio Is Most Typically