Portfolio insurance and financial market equilibrium
Article Abstract:
Portfolio insurance is an investment strategy utilizing dynamic hedging to ensure that the underlying value of the managed funds does not fall below a prescribed level. Portfolio insurance uses as its reference the market portfolio of all risky assets, usually Standard and Poor's 500 index. Portfolio insurance strategy requires that stocks be sold if they decline or bought if their price rises. Critics contend that the simultaneous use of portfolio insurance strategies by a large number of investors will increase market volatility by enhancing market weaknesses and strengths. Research using a model of a frictionless market indicates that portfolio insurance strategies may incur additional liquidity-related costs, but that these strategies may be self-limiting because other investors take them into account when planning their own investment strategies.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1989
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Evaluating natural resource investments
Article Abstract:
The high degree of uncertainty about mining output prices makes it difficult to evaluate mining and other natural resource projects. Such projects can be valued using continuous time arbitrage techniques and stochastic control theory. These techniques can also be used to determine the optimal policies for developing, managing, or closing mines. These techniques can also be adapted to any project in which uncertainty over future revenues is a primary concern.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1985
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Arbitrage in stock index futures
Article Abstract:
A study of 16 future contracts maturing from 1983 to 1987 was conducted to determine the optimal arbitrage strategy with transaction costs for an arbitrageur or program trader in stock futures contracts. The performance of the suggested strategy was simulated on the contracts to demonstrate that the optimal policy depends on the stochastic procedure that illustrates the evolution of the simple arbitrage opportunity.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1990
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