System and method for emulating a long/short hedge fund index in a trading system

Abstract

A system comprises a memory operable to store a compound index that is based at least in part on a plurality of component indices. The plurality of component indices comprise an international developed markets equity index, a U.S. large-cap equity index, and a U.S. small-cap equity index. The compound index is further based at least in part on a plurality of weights, wherein each weight is associated with a respective one of the plurality of component indices. The system further comprises a processor communicatively coupled to the memory and operable to update the plurality of weights according to a regression analysis. The regression analysis is based at least in part on a respective set of returns associated with each of the plurality of component indices and with a hedge fund index. The plurality of weights are updated such that the compound index emulates the hedge fund index. The processor is further operable to determine a current compound index value based at least in part on the plurality of component indices and on the updated plurality of weights. The processor is further operable to transmit the current compound index value to one or more clients.