"Portfolio Insurance" Refers to a Trading Strategy in Which

question 3

Multiple Choice

"Portfolio insurance" refers to a trading strategy in which

• A)You insure a portfolio of bonds against default at the aggregate level rather than buying insurance on each separate bond.
• B)You insure a portfolio of bonds against default by buying an insurance policy that pays a fixed sum of money if a trigger number of defaults occurs.
• C)You look to create a synthetic put on a given portfolio by dynamically trading in the assets in the portfolio.
• D)You insure a portfolio of stocks against a fall in their value by buying an insurance policy that pays a fixed sum of money if your portfolio value falls below a trigger level.

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Definitions:

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