Journal of Multidisciplinary Applied Natural Science
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https://doi.org/10.47352/jmans.2774-3047.319
Andi Fitriawati
Sapto Wahyu Indratno
Kurnia Novita Sari
Unit-linked insurance product (ULIPs) is a type of life insurance that provides two key benefits: protection (life) and investment. In this type of insurance, premiums are allocated to both risky and riskless assets, creating a portfolio that guarantees a minimum benefit. Therefore, it is essential to assess a portfolio’s value based on its ability to meet the guaranteed minimum benefits, which can be done using the dynamic-constant proportion portfolio insurance (D-CPPI) strategy. The D-CPPI strategy employs a dynamic risk multiplier that adjusts according to the price movements of the risky asset. When the price of the risky asset increases, the multiplier also increases, and vice versa. If the proportion of risky assets in the portfolio is limited, a modified dynamic risk multiplier is needed. The objective of this strategy is to maximize a portfolio’s value while minimizing risk. However, fluctuations in the price of risky assets may cause the portfolio value to fall below the guaranteed minimum, a risk known as gap risk. Hedging is required to mitigate the gap risk. This can be achieved by selecting and adjusting the initial dynamic risk multiplier in a suitable manner. The analysis presented in this paper uses actual data from the closing price of BBRI stocks from January 2017 to December 2021 as the risky asset. The results show that in a modified dynamic risk multiplier and hedging, the portfolio value consistently remains above or equal to the guaranteed minimum benefit.
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