Safeguarding Downside Risk in Portfolio Insurance: Navigating Swiss Stock Market Regimes with Options, Trading Signals, and Financial Products

Sylvestre Blanc, Emmanuel Fragnière, Francesc Naya, Nils Tuchschmid

2024

Abstract

Our research uses options to safeguard equity portfolios from downside risk. Despite the cost challenges of passive put protection, we explore leveraging diverse market signals, backward and forward-looking ones, to enhance portfolio risk-return balance while maintaining acceptable safeguards. These signals aid in selecting underlying assets for option positions, aiming to achieve protection while minimizing put premium expenditure. Certain signals, like "trend" or "low volatility”, either empirical or implied, demonstrate added value, although their effectiveness depends on market conditions (or regimes). We also evaluate whether a set of trading rules can enhance the efficiency of such strategies. Our study highlights the importance of financial product safety, akin to safety measures for industrial products. By doing so, we underline the importance of portfolio insurance in finance. Further developments will aim at implementing a trading system that offers greater adaptability to different market regimes, for example high volatility phases, and under real market conditions.

Paper Citation

in Harvard Style

Blanc S., Fragnière E., Naya F. and Tuchschmid N. (2024). Safeguarding Downside Risk in Portfolio Insurance: Navigating Swiss Stock Market Regimes with Options, Trading Signals, and Financial Products. In Proceedings of the 6th International Conference on Finance, Economics, Management and IT Business - Volume 1: FEMIB; ISBN 978-989-758-695-8, SciTePress, pages 33-41. DOI: 10.5220/0012524200003717

in Bibtex Style

@conference{femib24,
author={Sylvestre Blanc and Emmanuel Fragnière and Francesc Naya and Nils Tuchschmid},
title={Safeguarding Downside Risk in Portfolio Insurance: Navigating Swiss Stock Market Regimes with Options, Trading Signals, and Financial Products},
booktitle={Proceedings of the 6th International Conference on Finance, Economics, Management and IT Business - Volume 1: FEMIB},
year={2024},
pages={33-41},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0012524200003717},
isbn={978-989-758-695-8},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 6th International Conference on Finance, Economics, Management and IT Business - Volume 1: FEMIB
TI - Safeguarding Downside Risk in Portfolio Insurance: Navigating Swiss Stock Market Regimes with Options, Trading Signals, and Financial Products
SN - 978-989-758-695-8
AU - Blanc S.
AU - Fragnière E.
AU - Naya F.
AU - Tuchschmid N.
PY - 2024
SP - 33
EP - 41
DO - 10.5220/0012524200003717
PB - SciTePress