Performance evaluation of portfolio insurance strategies.

Summary The objective of this thesis is to evaluate and compare the performance of portfolio insurance strategies in an attempt to define which strategies should be preferred by investors. We compare a number of insurance strategies (OBPI, CPPI, synthetic put and stop-loss) with each other and with a few other benchmark strategies. We use different criteria for comparison which include: 1. pay-off distributions, level of protection, stochastic dominance and cost of insurance under different market conditions identified by Markovian regime-switching models. 2. Risk-adjusted performance measures that can reflect investors' preferences for risk and return. 3. Investor preferences by incorporating cumulative prospect theory (CPT). Our results seem to show a dominance of CPPI strategies in the majority of cases and for the majority of the comparison criteria.