Portfolio Insurance

AAA

DEFINITION of 'Portfolio Insurance'

1. A method of hedging a portfolio of stocks against the market risk by short selling stock index futures.

2. Brokerage insurance such as the Securities Investor Protection Corporation (SIPC).

INVESTOPEDIA EXPLAINS 'Portfolio Insurance'

1. This hedging technique is frequently used by institutional investors when the market direction is uncertain or volatile. Short selling index futures can offset any downturns, but it also hinder any gains.

2. SIPC is an insurance that provides brokerage customers up to $500,000 coverage for cash and securities held by a firm.

RELATED TERMS
  1. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  2. Builders Risk Hull Insurance

    A protection policy pertaining to when a ship is in the builders' ...
  3. Bridge Insurance

    Insurance coverage for bridges. This type of insurance covers ...
  4. Stock Market Crash Of 1987

    A rapid and severe downturn in stock prices that occurred in ...
  5. Constant Proportion Portfolio Insurance ...

    A method of portfolio insurance in which the investor sets a ...
  6. Asset Management

    1. The management of a client's investments by a financial services ...
Related Articles
  1. A Beginner's Guide To Hedging
    Options & Futures

    A Beginner's Guide To Hedging

  2. Futures Fundamentals
    Insurance

    Futures Fundamentals

  3. Will ETFs Eventually Replace Mutual ...
    Mutual Funds & ETFs

    Will ETFs Eventually Replace Mutual ...

  4. Understanding The Bond Behemoth That ...
    Mutual Funds & ETFs

    Understanding The Bond Behemoth That ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center