Trading Relative Performance with Alpha Indexes

Abstract:     
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

working papers series