Imagine you are a provider of portfolio insurance. You are establishing a four-y

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Imagine you are a provider of portfolio insurance. You are establishing a four-year program. The portfolio you manage is currently worth $70 million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-bills pay 6.2% per year. Assume for simplicity that the portfolio pays no dividends (or that all dividends are reinvested). What percentage of the portfolio should be placed in bills? What percentage of the portfolio should be placed in equity? Calculate the put delta and the amount held in bills if the stock portfolio falls by 3% on the first day of trading? What action should the manager take?

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Imagine you are a provider of portfolio insurance. You are establishing a four-y

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