Techniques for producing relative performance based indexes with corresponding tradable financial products
View Patent ↗Techniques are described for constructing benchmark-adjusted relative performance indexes that reflect total performance of a traded, target security relative to a benchmark instrument. Also described are derivative instruments such as exchange-traded futures and options that allow investors to take precise hedging or speculation positions on target security relative to the benchmark instrument.
1. A computer implemented method, comprising:
determining by one or more computers:
a value for a relative performance index, the relative performance index based on prices of a security and a benchmark security that is different from the security and with the security and the benchmark security traded on trading venues and having prices that are publicly observable and available from the respective trading venues; and
with the value of the relative performance index being determined by the one or more computers by:
multiplying, by the one or more computers, a previous relative performance index value by two ratios, the first ratio related to a current price for the security divided by a previous price for the security, and the second ratio related to a previous price of the benchmark security divided by a current price of the benchmark security.
2. The method of claim 1 further comprising:
adding by the one or more computers any income from either the security or the benchmark security to the respective current prices of the respective securities, prior to dividing.
3. The method of claim 1 further comprising:
raising by the one or more computers, prior to multiplying, the second ratio to the power of an adjustment factor for the second ratio.
4. The method of claim 3 , further comprising:
assigning by the one or more computers the adjustment factor a constant value.
5. The method of claim 3 , further comprising:
determining by the one or more computers the adjustment factor by an algorithm based on publicly available information.
6. The method of claim 1 , wherein the one or more computers that determine a value for the relative performance index, determine values for plural relative performance indexes for corresponding plural, different pairs of traded securities and benchmark securities.
7. The method of claim 1 , wherein the one or more computers periodically disseminate values for the relative performance index.
8. The method of claim 1 , further comprising:
producing derivative contracts based on the relative performance index.
9. The method of claim 8 , wherein the derivative contracts are futures contracts.
10. The method of claim 8 , wherein the derivative contracts are options contracts.
11. A non-transitory computer program product tangibly embodied on a computer readable storage device, the computer program product for administrating benchmark indexes comprises instructions for causing a computer to:
determine a value for a relative performance index, the relative performance index based on prices of a security and a benchmark security that is different from the security,
receive prices for the security and the benchmark security based on trading of the securities on trading venues; and
multiply a previous relative performance index value by two ratios, the first ratio related to a current price for the security divided by a previous price for the security, and the second ratio related to a previous price of the benchmark security divided by a current price of the benchmark security.
12. The computer program product of claim 11 , further comprising instructions to:
add any income attributable to either the security or the benchmark security to the respective current prices of the respective securities, prior to executing instructions to divide.
13. The computer program product of claim 11 further comprising instructions to:
raise, prior to multiplying, the second ratio to the power of an adjustment factor for the second ratio.
14. The computer program product of claim 13 , further comprising instructions to assign the adjustment factor is a constant value.
15. The computer program product of claim 13 , further comprising instructions to determine the adjustment factor by an algorithm based on publicly available information.
16. The computer program product of claim 11 , further comprising instructions to:
determine values for plural relative performance indexes for corresponding plural, different pairs of traded securities and benchmark securities.
17. The computer program product of claim 11 , further comprising instructions to cause one or more computers to periodically disseminate values for the relative performance index.
18. A non-transitory computer program product tangibly embodied on a computer readable storage device, the computer program product for administrating derivative contracts for benchmark indexes comprises instructions for causing a computer to:
receive a value for a relative performance index, the relative performance index value based on prices of a security and a benchmark security that is different from the security that is derived from multiplying a previous relative performance index value by two ratios, the first ratio related to a current price for the security divided by a previous price for the security, and the second ratio related to a previous price of the benchmark security divided by a current price of the benchmark security;
determine a first one of an initial strike price for option contracts or an initial mark to market price for futures contracts that are set to track a current value of the index in increments of currency; and
generate derivative contracts with an initial price that based at least in part on the value of the relative performance index.
19. The computer program product of claim 18 , wherein the derivative contracts are futures contracts.
20. The computer program product of claim 18 , wherein the derivative contracts are options contracts.
21. A computer system comprises:
a processor;
memory coupled to the processor;
a computer readable storage medium storing a computer program product for administrating benchmark indexes and derivative products comprises instructions for causing the computer to:
determine a value for a relative performance index, the relative performance index based on prices of a security and a benchmark security that is different from the security;
receive prices for the security and the benchmark security based on trading of the securities on trading venues;
multiply a previous relative performance index value by two ratios, the first ratio related to a current price for the security divided by a previous price for the security, and the second ratio related to a previous price of the benchmark security divided by a current price of the benchmark security.
22. The system of claim 21 , wherein the computer program product further comprises instructions to:
add any income attributable to either the security or the benchmark security to the respective current prices of the respective securities, prior to executing instructions to divide.
23. The system of claim 21 , wherein the computer program product further comprises instructions to:
raise, prior to multiplying, the second ratio to the power of an adjustment factor for the second ratio.
24. The system of claim 23 , wherein the computer program product further comprises instructions to:
assign the adjustment factor a constant value.
25. The system of claim 23 , wherein the computer program product further comprises instructions to:
determine the adjustment factor by an algorithm based on publicly available inputs.
26. The system of claim 21 , wherein the computer program product further comprises instructions to:
determine values for plural relative performance indexes for corresponding plural, different pairs of traded securities and benchmark securities.
27. The system of claim 21 , wherein the computer program product further comprises instructions to:
cause the system to periodically disseminate values for the relative performance index.
28. The system of claim 21 , wherein the computer program product further comprises instructions to:
record derivative contracts based on the relative performance index.
29. The system of claim 28 , wherein the derivative contracts are futures contracts.
30. The system of claim 28 , wherein the derivative contracts are options contracts.
31. A computer implemented method comprises:
receiving by one or more computers a selection from an investor of two distinct securities, with one security being a target security and the other being a benchmark security;
determining by one or more computers a relative performance index based on prices of the target security and the benchmark security by multiplying by the one or more computes a previous relative performance index value by two ratios, the first ratio related to a current price for the security divided by a previous price for the security, and the second ratio related to a previous price of the benchmark security divided by a current price of the benchmark security; and
disseminating by the one or more computers values for the relative performance index.
32. The method of claim 31 , further comprising:
adding by the one or more computers any income from either the security or the benchmark security to the respective current prices of the respective securities, prior to dividing; and
raising by the one or more computers, prior to multiplying, the second ratio to the power of an adjustment factor for the second ratio.
33. The method of claim 31 , further comprising:
generating derivative products based on the relative performance index.
34. The method of claim 31 , further comprising:
receiving by the one or more computers plural selections comprising plural pairs of distinct securities, with one security in each of the plural pairs being a target security and the other security in each of the plural pairs being a benchmark security; and
determining by the one or more computers corresponding relative performance indexes based on prices of the target security and the benchmark security for the pairs of securities.
35. A computer implemented method comprising:
receiving by one or more computers a selection from an investor of two distinct securities, with one security being a target security and the other being a benchmark security;
determining by the one or more computers a relative performance index based on prices of the target security and the benchmark security by:
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where b is a relative risk-adjustment coefficient,
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is the total realized return of holding security S over the time between t and t+Δt, and
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is the total realized return of holding security M over the time between t and t+Δt, raised to the power b; and
disseminating by the one or more computers values for the relative performance index.
36. The method of claim 35 , further comprising:
assigning by the one or more computer the relative risk-adjustment factor a constant value.
37. The method of claim 35 , further comprising:
determining by the one or more computer the relative risk-adjustment factor by an algorithm based on publicly available inputs.