Trading Relative Performance with Alpha Indexes
Jacob S. Sagi
University of North Carolina Kenan-Flagler Business School
Robert E. Whaley
Vanderbilt University - Finance
May 12, 2011
Relative performance is central to investment management and yet relative performance securities do not trade directly. Complex trading strategies must be devised to capture relative gains. This paper introduces a suite of relative performance indexes and index derivatives that offer new and attractive payoff structures. We illustrate a variety of ways in which the products can provide a more efficient and cost-effective means of realizing investment objectives than can traditional futures and options markets.
Number of Pages in PDF File: 38
Keywords: Options and Futures on Relative Performance, Trading Correlation, Alpha Indexes
JEL Classification: G11, G12, G13
Date posted: October 16, 2010 ; Last revised: November 23, 2012
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