Business Day for an asset refers to a day where the asset is trading and has a settlement Close Price.
Asset refers to one of the selected components of the Index. Assets can be in the form of a fixed contract or a rolling contract.
Price, P(t,i) refers to the close price on business day t of Asset i.
Return, r % (t,i) refers to percentage returns, (P(t,i) - P(t-1,i))/ P(t-1,i).
Product refers to the AiLA Index, where its output are daily weights for each asset in the index.
Mid Cap Logic requires the execution of instructions on the close of the next Business Day. This is typically used for indices with a capacity lower than US$1 billion.
Large Cap Logic is typically used for indices with a capacity of US$1bn and above, where a different execution process is applied as described below.
Weights are calculated just after close on each business day.
Inline with the other types of AiLA indices, each Asset is assigned Daily Rebalancing Caps across the curve to prevent trading with a significant amount of slippage. These are specified under the following four Durations to the Expiry Date:
Each Asset is assigned Daily Asset Caps equal to a given multiple of their rebalancing cap value, where the multiple used is 1x (4x) for the Mid (Large) Cap logic. The multiple hence suggests the number of days necessary to trade in/out of the max allowed weight.
(* in the formulas s refer to asset allocation signals, positive/negative referring to long/short.)
[SciPy]: E. Jones et al., Open Source Scientific Tools for Python (2001), http://www.scipy.org.