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Alpha insurance: A computational framework to measure hedging demands for active investors

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  • Ashraf El-Ansary

    (JP Morgan Asset Management)

Abstract

The purpose of the paper is to develop the concept of portfolio insurance against active managers' stock selection risks. The insurance premium is estimated through the use of exotic options and the impact on investors' utility is analysed within a multi-moment efficient frontier framework. For illustration, the suggested methodology is applied to the Swiss Market Index and employed to estimate the hedging demands faced by investors when the portfolio choice problem is considered in a multi-period framework.

Suggested Citation

  • Ashraf El-Ansary, 2008. "Alpha insurance: A computational framework to measure hedging demands for active investors," Journal of Asset Management, Palgrave Macmillan, vol. 9(5), pages 310-320, December.
    • Handle: RePEc:pal:assmgt:v:9:y:2008:i:5:d:10.1057_jam.2008.30
    DOI: 10.1057/jam.2008.30
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    References listed on IDEAS

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    1. Scott, Robert C & Horvath, Philip A, 1980. "On the Direction of Preference for Moments of Higher Order Than the Variance," Journal of Finance, American Finance Association, vol. 35(4), pages 915-919, September.
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