Customized index

Customized indices often refer to a traditional index but differ on the weighting of their constituents and their level of dividends. The traditional financial index that serves as the "base" of the proprietary index is often mentioned in its name. For example, the CAC Large 60® index refers to the CAC 40 index expanded by 20 additional stocks.

Customized indices were created by the financial engineers of investment banks - the structurers - in order to bring innovation with new themes or to be able to play in certain sectors and to respond to risk hedging issues - notably the dividend risk.

As their name suggests, these indices have the particularity of belonging to the issuer - the investment bank - which designed them. They are administered and calculated by companies like Euronext, MSCI, S&P, Stoxx, Solactive etc. on behalf of their clients who have exclusive rights to use it. Most of the time, only they can structure products with this underlying index, even if certain issuers make the data accessible to facilitate pricing by several banks.

To learn more about the difference between traditional and customized indices, head to this guide.