Retirement Portfolio Resilience Perspective
Primary Pillar: Risk Pricing Discipline
Supporting Pillars: Retirement Portfolio Construction • Resilience Across Market Environments
This foundational educational paper introduces the principles of equity protection using transparent market pricing and publicly available exchange-traded options.
Viewed through today's Retirement Portfolio Resilience Framework, the enduring contribution of this publication is its commitment to teaching first principles through observable market evidence. Rather than asking investors to rely on proprietary methods or opinion, it explains how the commercial pricing of protection can be understood, verified and incorporated into disciplined portfolio construction. While the examples reflect market conditions in early 2016, the underlying philosophy of evidence-based decision making, commercial capital allocation and resilient portfolio architecture has remained central to the evolution of Retirement Portfolio Resilience.
This publication forms part of Gyrostat's foundational educational archive documenting the origins of the Retirement Portfolio Resilience Framework.
The theoretical knowledge on how to “insure” your portfolio has been around since 1973 when Fisher Black and Myron Scholes published a paper, the basis for which a Nobel Prize in Economics was awarded fourteen years later. Their work created one of the most important concepts in modern financial theory, the mathematical model for pricing derivative investment instruments, including options.
A put option gives you the right to sell a stock at a pre‐defined price for a pre‐defined period of time. You don’t have to sell the stock; you can sell the protection back into the market and receive the cash. It is like an insurance policy, but like all insurance it comes at a price.
The ASX offers investor education at their web‐site for the “do it yourself” alternative.
