fintech-algorithms
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Net Total-Return Index

Install and import#

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/return-variants/net-total-return-index";

Signature#

calculate(data)

Reinvests dividends after withholding tax. Over a decade the gap from the gross variant is large enough that quoting the wrong one materially misstates performance — and both are published under nearly the same name.

Parameters#

NameTypeNotes
data{ prices: number[]; dividends: number[]; withholdingRates: number[]; baseLevel: number }withholdingRates is per observation because the rate depends on the domicile pairing and changes with treaty. baseLevel is the index value at the start of the series; it scales the level but never the returns.

Returns#

{ returns, levels, endingLevel }

Total returns with dividends reinvested net of withholding.

Errors#

  • When a withholding rate falls outside 0…1 — throws

Complexity: time O(n), space O(n).

Worked example#

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input#

data
{
  "prices": [100, 102, 99, 101, 103, 104],
  "dividends": [0, 0, 3, 0, 0, 1],
  "withholdingRates": [0, 0, 0.25, 0, 0, 0.25],
  "baseLevel": 1000
}

Call#

calculate(data)

Returns#

object with 3 fields: returns, levels, endingLevel

{
  "returns": [0.02, -0.007353, 0.020202, 0.019802, 0.01699],
  "levels": [1000, 1020, 1012.5, 1032.954545, 1053.409091, 1071.306818],
  "endingLevel": 1071.306818
}

Diagrams#

Net Total-Return Index — article hero
Net Total-Return Index — failure guard
Net Total-Return Index — worked example

Calculation flow#

Net Total-Return Index calculation flow 
flowchart LR
    A["Point-in-time inputs"] --> B["Validate units and timing"]
    B --> C{"Contract feasible?"}
    C -->|No| D["Reject with reason"]
    C -->|Yes| E["Calculate Net Total-Return Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Net Total-Return Index methodology state 
stateDiagram-v2
    [*] --> FrozenInputs
    FrozenInputs --> Validated: contract passes
    FrozenInputs --> Rejected: missing or infeasible
    Validated --> Calculated: apply named rule
    Calculated --> Audited: invariants pass
    Calculated --> Rejected: invariant fails
    Audited --> Published: version and timestamp recorded
    Published --> Revised: approved correction
    Revised --> FrozenInputs: rebuild from retained source state

How it works#

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References#

The rest of the Return Variants family#