Technolgy for producing relative performance based indexes with corresponding tradable financial products

Abstract

Technology is described for constructing benchmark-adjusted relative performance indexes that reflect total performance of a traded, target security relative to a benchmark instrument. Derivative instruments, such as exchange-traded futures and options, allow investors to take precise hedging or speculation positions on target security relative to the benchmark instrument.

What is claimed is: 
     
         1 . A computer implemented method, comprising:
 recording, by one or more computers, receipt of margin for a first position in a derivative instrument that derives its value from a relative performance index, the relative performance index based on prices of a publically traded security and a publically traded benchmark security that is different from the publically traded security; and   recording, by the one or more computers, receipt of margin for a second, contra-position in derivative instrument that derives its value from the same relative performance index; and   issuing derivative contracts.   
     
     
         2 . The method of  claim 1 , further comprising:
 periodically valuing the relative performance index that the derivative instruments derive values from 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.   
     
     
         3 . The method of  claim 2 , wherein periodically valuing further comprises:
 adding, by the one or more computers, any income from either the security or the benchmark security to the respective prices of the respective securities, prior to dividing.   
     
     
         4 . The method of  claim 2 , wherein periodically valuing further comprises:
 raising, by the one or more computers, the second ratio by an exponent that corresponds to an adjustment factor for the second ratio.   
     
     
         5 . The method of  claim 4 , wherein the adjustment factor is a constant value. 
     
     
         6 . The method of  claim 5 , wherein the adjustment factor is determined by an algorithm based on publicly available inputs. 
     
     
         7 . The method of  claim 1 , wherein the derivative contracts are selected from futures contracts and options contracts. 
     
     
         8 . A computer program product tangibly embodied on a non-transitory, computer-readable storage medium for administering derivative products comprises instructions for causing a computer to:
 record receipt of a first position in a derivative instrument that derives its value from a relative performance index, the relative performance index based on prices of a publically traded security and a publically traded benchmark security that is different from the publically traded security;   record receipt of a second, contra-position in derivative instrument that derives its value from the same relative performance index; and   periodically calculate a value of the relative performance index that the derivative instruments derive values from by instructions that execute the following algorithm:   
       
         
           
             
               
                 I 
                 
                   t 
                   + 
                   1 
                 
               
               = 
               
                 
                   I 
                   t 
                 
                 × 
                 
                   
                     P 
                     
                       
                         t 
                         + 
                         1 
                       
                       , 
                       S 
                     
                   
                   
                     P 
                     
                       t 
                       , 
                       S 
                     
                   
                 
                 × 
                 
                   
                     
                       ( 
                       
                         
                           P 
                           
                             t 
                             , 
                             M 
                           
                         
                         
                           P 
                           
                             
                               t 
                               + 
                               1 
                             
                             , 
                             M 
                           
                         
                       
                       ) 
                     
                     
                       β 
                       t 
                     
                   
                   . 
                 
               
             
           
         
         where β t  is an adjustment factor set to be a constant or is algorithmically determined P are published prices, t is a time period and I is price of the index, S, is the traded security and M is the benchmark security, 
       
     
     
         9 . The computer program product of  claim 8 , further comprising instructions for causing the computer to add income to the algorithm in accordance with the following: 
       
         
           
             
               
                 I 
                 
                   t 
                   + 
                   1 
                 
               
               = 
               
                 
                   I 
                   t 
                 
                 × 
                 
                   
                     
                       P 
                       
                         
                           t 
                           + 
                           1 
                         
                         , 
                         S 
                       
                     
                     + 
                     
                       D 
                       
                         
                           t 
                           + 
                           1 
                         
                         , 
                         S 
                       
                     
                   
                   
                     P 
                     
                       t 
                       , 
                       S 
                     
                   
                 
                 × 
                 
                   
                     
                       ( 
                       
                         
                           P 
                           
                             t 
                             , 
                             M 
                           
                         
                         
                           
                             P 
                             
                               
                                 t 
                                 + 
                                 1 
                               
                               , 
                               M 
                             
                           
                           + 
                           
                             D 
                             
                               
                                 t 
                                 + 
                                 1 
                               
                               , 
                               M 
                             
                           
                         
                       
                       ) 
                     
                     
                       β 
                       t 
                     
                   
                   . 
                 
               
             
           
         
         where D t+1,S  and D t+1,M  are attributable incomes to the respective securities S and M.