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Leveraging traditional financial asset protection methods for digital asset security

Author

Listed:
  • Xiao, Biyun
  • Lin, Su
  • Wu, Chunxiao
  • Sun, Boming

Abstract

The rise of the digital economy has highlighted the key role of digital assets in driving innovation and enhancing economic resilience. However, the volatility of digital assets requires effective value protection strategies to cope with market fluctuations. This study compares the performance of option-based portfolio insurance (OBPI) and constant-proportion portfolio insurance (CPPI) in managing digital asset volatility. By integrating Monte Carlo simulations, the research evaluates portfolio performance under different market conditions and incorporates fixed transaction costs to improve CPPI modeling. Based on the Hong Kong stock market, the analysis shows that CPPI outperforms OBPI in a bull market, but both strategies yield comparable results in a flat market. Conversely, OBPI provides superior downside protection during bear markets. This study contributes to the growing body of literature on digital asset value protection, emphasizing the importance of customized strategies in the digital economy to ensure the sustainable growth and stability of assets.

Suggested Citation

  • Xiao, Biyun & Lin, Su & Wu, Chunxiao & Sun, Boming, 2025. "Leveraging traditional financial asset protection methods for digital asset security," International Review of Economics & Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:reveco:v:99:y:2025:i:c:s105905602500173x
    DOI: 10.1016/j.iref.2025.104010
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