Custom Market Indices

A custom market index is a weighted combination of one or more market indices. Each included index is assigned a percentage weight.

It is not possible to edit any market index values in a custom market index. These are handled entirely by the system.

The generation of Market Index Values

Consider the custom index above. It is defined as

• 125% of P2A_03

• 33% of P4A-03

• Lumpsum adjustment of -30

When generating the market index values for the custom market index it uses the market index values from each linked market index. For a market index value to be generated for valid from date D, all market indices in the custom market index must have a market index value with valid from date D. If one of the market indices is missing a market index value for that date, the custom market index will not generate a market index value for that date.

Formula

A market index value (C_MIV) for a custom market index for valid from date (D) is generated using the following formula if there exists a market index value (MIV) with the same valid from date in every market index (MI).

$C\_MIV^D = (\sum_{n=1}^{\#MI}Pct_{MI_n}*MIV_{MI_n}^D) + lumpsum\ adjustment$

Application of formula

The list on the left is the first 15 market index values from market index P2A_03 and P4A_03 on the right.

When the custom market index containing these two market indices is generating its own market index values it groups every market index value by its valid from date. This would create a map where 29/11/13 would have only the market index value from P4A_03, 30/11/13 would have the 6000 market index value from P2A_03 and the 15000 market index value from P4A_03, etc.

When every market index value has been grouped by valid from date together it discards all entries where the valid from date does not have a market index value from each market index. In our example the first entry, 29/11/13 is discarded as it is only present in P4A_03.

The remaining entries are then used to generate the actual market index values for the custom market index, where the afformentioned formula is used. Inputing the data for the first entry into the formula it looks like this:

$$C\_MIV^{30/11/13}=(1.25 *6000)+(0.33*15000)+(-30)=12420$$

The following image is the complete custom market index values generated for the custom market index based on 125% of P2A_03 and 33% of P4A_03 with -30 in lumpsum adjustment.

When market index value are regenerated

The market index values for a custom market is regenerated when the following happens:

• The lumpsum adjustment is changed

• The percentage for one of the market indices is updated

• A market index value on one of the market indices on the custom market index is updated and every market index that is linked to the custom market index has been updated today

  • If a custom market index has market index A and B in it, and a market index value on market index A is updated today, but market index B has not been updated today, then the custom market index will not be regenerated by that update. If you then update a market index value on market index B afterwards, then both are updated today, and the market index values on the custom market index will be regenerated.

Requirements

All market indices in a custom market index must have the same Unit, Currency, Category.