S&P Indices has launched the S&P Dynamic Asset Exchange Indices, designed as a dynamic asset allocation strategy by replicating the option pricing formula developed by William Margrabe.
The index series seeks to capture the better performance of two uncorrelated underlying assets in the medium term that are held in a portfolio with a constantly changing mix.
The index family consists of the S&P Dynamic Asset Exchange (US Index) and the S&P Dynamic Asset Exchange (Europe Index). The indices use tradeable instruments to represent the underlying asset classes, facilitating index replication and creation of index-linked investment products. The indices are long-only and dynamically allocate between equity and bonds to replicate the payout profile of an exchange option.
* The S&P Dynamic Asset Exchange US Index seeks to capture the return of the better performing asset class between US equities and U.S. government bonds. U.S. equities are represented by the S&P 500(r) Total Return Index and U.S. government bonds are represented by the S&P 10-Year U.S. Treasury Note Futures Total Return Index.
* The S&P Dynamic Asset Exchange Europe Index seeks to capture the return of the better performing asset class between European equities and European government bonds. European equities and European government bonds are represented by the S&P Euro 75 Total Return Index and the S&P Euro-Bund Futures Total Return Index, respectively. The S&P Euro-Bunds is an index measuring performance of German Government Bonds.
"Given the recent performance of equities and general perceptions of bond market valuation at present, we saw this as a particularly appropriate time to launch a dynamic index," says Alka Banerjee, Vice President of Global & Strategy Indices at S&P Indices. "These Indices facilitate index replication and we foresee that they will be used to create index-linked investment products for investors."
S&P collaborated with Grenbell Advisors GmbH to develop the series. Founded in 2007 and headquartered in Munich, Grenbell specializes in the active management of time variable risk premium as a key factor for investment performance.
Complete details of the index's guidelines and construction are available at www.indices.standardandpoors.com
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