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Asian Journal of Management
Year : 2020, Volume : 11, Issue : 2
First page : ( 154) Last page : ( 160)
Print ISSN : 0976-495X. Online ISSN : 2321-5763.
Article DOI : 10.5958/2321-5763.2020.00024.4

A Study on Portfolio Insurance Strategies on Indian Equity (Nifty 50)

Lakshmi Y*, Ajay R**, Jagannathan Uday Kumar

Faculty of Management and Commerce, Ramaiah University of Applied Science, Gnanagangothri Campus, M S R Nagar, Bengaluru-560054, Karnataka, India

*Corresponding Author E-mail: lak123reddy@gmail.com

**ajay.ca.mc@msruas.ac.in

Online published on 10 August, 2020.

Abstract

Portfolio Insurance Strategies are the investment strategies used by the investors to avoid their losses by using various financial instruments such as equites and debts and derivative are combined in such a way that degradation of portfolio value is protected. It is a dynamic hedging strategy which uses stock index. It implies buying and selling securities periodically to maintain limit of the portfolio value. The working of portfolio insurance is similar to buying an index put option and can also be done by using listed index options. Due to the possibility of gaining advantages from these strategies, investor can opt these strategies according to the market conditions to maximize their returns. The study focuses on eight Portfolio Insurance Strategies: Synthetic Call, Covered Call, Long Combo, Synthetic Put, Covered Put, Long Straddle, Short Straddle, Long Strangle Strategies, these strategies can be called Portfolio Insurance Strategies because of their nature of investment and returns. The objectives of the study to analyze the risk and return associated with these strategies on 5 years historical data of Nifty 50 and formulated hypothesis to know impact of variables such as Risk, Volatility, Degree of Risk. The study Concluded that Insurance Portfolio Strategies are more beneficial for the investors who uses them according to the market conditions.

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Keywords

Hedging, Unhedging, Portfolio Insurance Strategies, Volatility risk, Index Option.

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