# Pricing Assets in the S&P Dynamic Asset Exchange

I am attempting to recreate the S&P Dynamic Asset Exchange using the methodology outlined in this paper.

I am struggling to 'normalize' the prices of the assets properly. On page 6 of the aforementioned paper,

Price A(t) = Price of asset A normalized to equal 100 on the last trading day of the preceding year

Price B(t) = Price of asset B normalized to equal 100 on the last trading day of the preceding year

-- What methodology is implied for 'normalize' -- the standard Random Variable normalization? (Random Variable - Mean)/(Standard Deviation)? Or is there an alternative method?

• Are you talking about returns or price levels? Your question and comment differ in that regard. And no, I had another procedure in mind - just try to adjust the variable through multiplying by a scaling factor. E.g. $$P_{t_0}=25 \wedge P_{t_{+1}} = 30 \Rightarrow P_{t_0}^*=100 \wedge P_{t_{+1}}^* = {100\over25} \times30=120$$ At least that's what I think they meant by normalizing. – Karol J. Piczak Jun 24 '13 at 14:12