Review of Financial Studies Vol. 8 No. 4 1995
A General Equilibrium Model of Portfolio Insurance
Abstract
[This article examines the effects of portfolio insurance on market and asset price dynamics in a general equilibrium continuous-time model. Portfolio insurers are modeled as expected utility maximizing agents. Martingale methods are employed in solving the individual agents' dynamic consumption-portfolio problems. Comparisons are made between the optimal consumption processes, optimally invested wealth and portfolio strategies of the portfolio insurers and "normal agents." At a general equilibrium level, comparisons across economies reveal that the market volatility and risk premium are decreased, and the asset and market price levels increased, by the presence of portfolio insurance.]
- Volume
- 8
- Issue
- 4
- Pages
- 1059-1090
- Sources
- bibtex:phds-export.bib