Portfolio Insurance and October 19th

  title={Portfolio Insurance and October 19th},
  author={Hayne E. Leland.},
  journal={California Management Review},
  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… 
Portfolio insurance strategies are designed to achieve a minimum level of wealth while at the same time participating in upward moving markets. The most prominent examples of dynamic versions are
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An Equilibrium Model of the Crash
  • F. Black
  • Economics
    NBER Macroeconomics Annual
  • 1988
Fischer Black theorizes that investors' tastes had been changing, in that they were tolerating higher levels of risk at various levels of income than before. He also assumes that investors' estimates
Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene F. Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting
Some critics, failing to understand the nature of the dynamics required to replicate a put option, have incorrectly characterized the dynamics as "buy high, sell low
  • Intermarket
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
      350 contracts of the S&P 500 Index Futures, representing a value of about $350 million. Regulations currently under review limited the extent of information dissemination of these trades
        Stock Index Futures Commentary
        • Financial Futures Department
        Formally, most portfolio insurance programs attempt to replicate a (long-term) put option. For further specifics, see
        • Financial Analysts Journal
        Gennotte, "On the Stock Market Crash and Portfolio Insurance," Finance working
        • 1988