Portfolio Insurance Strategy Insurance Investment

Portfolio risks include systematic risks and unsystematic risks. In 1952, H. Markowitz who started the theory of portfolio optimization brought forward that unsystematic risk can be depressed by diversification. Portfolio insurance strategies are the effective means to debase systematic risks. By electing proper strategies, investors can not only be guarantied that portfolio would not be under the lowest standard, but also have the increasing potential, and achieve the purpose of maintaining and increasing value.After introducing the operating principle of portfolio insurance strat-egies, this paper summarized the strongpoint and shortcoming of diversif-ied portfolio performance; analyzed characteristics and applications of portfolio insurance; and give the adjust disipline. Then in view of the features of insurance portfolio, this article made the modification of Constant Proportion Portfolio Insurance and Time-Invariant Portfolio Protection, to adapt to the insurance portfolio. Finally the paper researched portfolio insurance strategies which are frequently used in the market, and assumed risk assets subject to geometry of Brownian motion; obtained the stochastic differential equation of total assets under the CPPI model. And, this paper proved that the expected earning of portfolio wouldn't be lower than the minimum capital preservation which ensured the proceeds at maturity. Under the Asian Fiduciary Call model, total assets consist of maturity bonds and Asian option. The difficult of estimating the value of total assets is solving the value of Asian option. This paper gave the PDE of Asian options and solved this PDE by Monte Carlo simulation method.