Trading Relative Performance with Alpha Indexes

38 Pages Posted: 16 Oct 2010 Last revised: 23 Nov 2012

Jacob S. Sagi

University of North Carolina Kenan-Flagler Business School

Robert E. Whaley

Vanderbilt University - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2011

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.

Keywords: Options and Futures on Relative Performance, Trading Correlation, Alpha Indexes

JEL Classification: G11, G12, G13

Suggested Citation

Sagi, Jacob S. and Whaley, Robert E., Trading Relative Performance with Alpha Indexes (May 12, 2011). Available at SSRN: https://ssrn.com/abstract=1692738 or http://dx.doi.org/10.2139/ssrn.1692738

Jacob Sagi

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

HOME PAGE: http://public.kenan-flagler.unc.edu/faculty/sagij/

Robert E. Whaley (Contact Author)

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-343-7747 (Phone)
615-376-8879 (Fax)

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