Portfolio insurance

Portfolio insurance,

Definition of Portfolio insurance:

  1. Portfolio insurance is the strategy of hedging a portfolio of stocks against market risk by short-selling stock index futures. This technique, developed by Mark Rubinstein and Hayne Leland in 1976, aims to limit the losses a portfolio might experience as stocks decline in price without that portfolio's manager having to sell off those stocks. Alternatively, portfolio insurance can also refer to brokerage insurance, such as that available from the Securities Investor Protection Corporation (SIPC).

  2. A strategy designed to protect a portfolio of investments against potential losses.

  3. Method of protecting (hedging) the value of a stock portfolio by selling stock index futures contracts when the stockmarket declines.

  4. Portfolio insurance is a hedging technique frequently used by institutional investors when the market direction is uncertain or volatile. Short selling index futures can offset any downturns, but it also hinders any gains. This hedging technique is a favorite of institutional investors when market conditions are uncertain or abnormally volatile. .

How to use Portfolio insurance in a sentence?

  1. During the financial crisis, banks and other lenders substantially increased their use of portfolio insurance.
  2. In these cases, risk is often limited by the short-selling of stock index futures.
  3. Portfolio insurance is a hedging strategy used to limit portfolio losses when stocks decline in value without having to sell off stock.
  4. Portfolio insurance can also refer to brokerage insurance.

Meaning of Portfolio insurance & Portfolio insurance Definition