Portfolio Insurance and October 19th

@article{Leland1988PortfolioIA,
  title={Portfolio Insurance and October 19th},
  author={Hayne E. Leland.},
  journal={California Management Review},
  year={1988},
  volume={30},
  pages={80 - 89}
}
  • H. Leland.
  • Published 1 July 1988
  • Economics
  • California Management Review
Portfolio insurance is a hedging technique that allows the maximum exposure to highreturn assets while providing reasonable assurance that a prespecified minimum return will be achieved. While it is true that the chaotic market conditions of October 19th made portfolio insurance more costly than normal, it still provided substantial protection. Portfolio insurance did not significantly contribute to the decline of stock prices on October 19th, rather the magnitude of the market fall was due to… 
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The market crash of October 19, 1987, undermined two preconditions of all portfolio insurance programs-() low transaction costs and (2) price continuity. As a result, although most portfolio
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These numbers reflect a typical program's performance with the stated objectives. Other accounts with different objectives would result in different numbers
    Some observers have felt that market-makers' volume should be omitted, since they both buy and sell with the day. Such an adjustment would raise portfolio insurance's proportion of total
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