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Journal articles (2001), Journal of Asset Management, pp. 136-161

Portfolio Insurance and Market Crashes

Portfolio insurance has traditionally taken two forms: the buying of put options and the dynamic replication of a given risk profile. While the first method often presents a prohibitive cost and lacks of flexibility, the second method does not always lead to the expected risk/return profile due to market imperfections such as market illiquidity. This article shows how new financial derivatives called "crash options" could be used to protect investors' portfolios during periods of extreme volatility.

LONGIN, F. (2001). Portfolio Insurance and Market Crashes. Journal of Asset Management, pp. 136-161.