Asset Liability & Portfolio Management

Long/Short Strategies with Index Futures Portfolios

Diploma Thesis in "Mathematical Finance", Oxford (2006)


Long/short equity strategies are long known in the financial community. This dissertation shows how to extend this concept to another financial instrument class: stock index futures. It resumes briefly some properties of stock indices and index futures and defines the tradable portfolio.


Based on an intraday market data analysis, it shows that the Ornstein-Uhlenbeck process is an appropriate model to describe the evolution of such long/short futures portfolios. It also sketches a possible technical design of a pairs trading tool. It presents some arguments how to parameterize it, and outlooks to some extensions of the strategy as cross

hedging for index options.