Dynamic portfolio insurance and equilibrium pricing / Zhongquan Zhou.

Format:

Book

Manuscript

Microformat

Thesis/Dissertation

Author/Creator:

Zhou, Zhongquan.

Contributor:

Grossman, Sanford, advisor.

University of Pennsylvania.

Language:

English

Subjects (All):

Penn dissertations--Finance.

Finance--Penn dissertations.

Penn dissertations--Managerial science and applied economics.

Managerial science and applied economics--Penn dissertations.

Local Subjects:

Penn dissertations--Finance.

Finance--Penn dissertations.

Penn dissertations--Managerial science and applied economics.

Managerial science and applied economics--Penn dissertations.

Physical Description:

vi, 120 leaves : illustrations ; 29 cm

Production:

1993.

Summary:

The first part of the thesis analyzes dynamic trading strategies such that at each point in time, the value of a portfolio will never fall below a certain percentage of the maximum value the portfolio has achieved up to that time. For constant relative risk aversion utility function, the optimal policy involves an investment in the risk asset in proportion to the surplus (that is, current wealth minus the floor). It is shown that the investment in the risky asset can be expected to fall when the current value of the portfolio is close to its all time high. The second part of the thesis considers the equilibrium implications of dynamic portfolio insurance. Given that a certain group of risk managers do not want to lose more than a certain percentage of their initial capital, what will happen to the equilibrium price of the risky asset? We find that the volatility will increase in response to the presence of portfolio insurers. Also we find that the risk premium exhibits countercyclicality.

Notes:

Supervisor: Sanford Grossman.

Thesis (Ph.D. in Finance) -- Graduate School of Arts and Sciences, University of Pennsylvania, 1993.

Includes bibliography and index.

Local Notes:

University Microfilms order no.: 93-21505.

OCLC:

77960982