Bridge over ocean
1 November 2011 Financial Analysts Journal Volume 67, Issue 6

Trading Relative Performance with Alpha Indexes

  1. Jacob S. Sagi
  2. Robert E. Whaley

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. The authors introduce a suite of relative performance indexes and index derivatives that offer new and attractive payoff structures. They demonstrate a variety of ways in which these products can provide a more efficient and cost-effective means of realizing investment objectives than can traditional futures and option markets.

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