Portfolio insurance is a technique that:
A) programs trading decisions so they can be automated.
B) constructs a synthetic put option for a share portfolio.
C) makes an arbitrage profit whenever share prices fall.
D) puts in place a ratio spread.

Question

Quizplus · Accepted Answer

Portfolio insurance constructs a synthetic put option for a share portfolio by using a combination of options and futures contracts. This allows investors to protect their portfolio from downside risk without having to sell their shares.

Portfolio Insurance Is a Technique That