MSR World Equities – Reversal, TV15 Index
Strategic Reversal Indices simulate trading a relatively simple counter-trend model in a futures contract or group of futures contracts. The model uses the widely known Black-Scholes option pricing model which builds a position opposite daily market movements based on the gamma statistic of Black-Scholes. The number of contracts that the index “owns” is determined by an algorithm based on the volatility exhibited by that futures market’s (or markets’) reversal positions over the previous six months. Annualized volatility is calculated by multiplying the standard deviation of daily returns by the square root of 252 (the estimated number of trading days in a year). This index simulates trading of a portfolio of Non-US equity index futures contracts based off the EuroStoxx 50, German DAX, FTSE 100, and NIKKEI 225. The entire index targets an annualized volatility of 15%.