Index Arbitrage

objective

Trade index cash-futures dislocations with fair-value diagnostics and execution-safe basket controls.

workflow

1. •define fair-value model with rates, dividends, and carry conventions.
2. •compute real-time basis dislocations versus fair value.
3. •build executable basket routes for cash and futures legs.
4. •stress dislocation persistence and execution slippage risk.
5. •deploy only when net basis edge exceeds implementation friction.

required diagnostics

• •basis residual distribution by index and session.
• •cash-leg completion risk and hedge mismatch cost.
• •fair-value input sensitivity to rates and dividends.
• •dislocation half-life and mean-reversion diagnostics.
• •net edge after exchange and financing costs.

risk controls

• •enforce max unhedged basis exposure and legging latency.
• •enforce stale-fair-value input checks and feed validation.
• •enforce auto-disable on basket completion degradation.

outputs

• •run python scripts/index_arbitrage_diagnostics.py input.csv --output diagnostics.json and keep the json artifact.
• •write an implementation memo using references/index-arbitrage-playbook.md with assumptions, tests, limits, and rollout plan.

resources

• •use scripts/index_arbitrage_diagnostics.py for deterministic diagnostics.
• •use references/index-arbitrage-playbook.md for the domain checklist and delivery structure.