The opportunity cost of portfolio insurance is the difference in the value of the insured portfolio and the value of the uninsured portfolio when the market goes up.

Question

Quizplus · Accepted Answer

The opportunity cost of portfolio insurance arises because the insured portfolio typically underperforms an uninsured portfolio in rising markets, due to the costs associated with the insurance strategies (like buying put options or other hedging costs), which reduce the portfolio's overall gains.

The Opportunity Cost of Portfolio Insurance Is the Difference in the Value