# Fixed-Decrement Index

`D03-F05-A04` · Index and Benchmark Engineering → Strategy Indices · archetype `record-transform` · difficulty 4/5 · verification **verified**

Full page: https://docs.thefintechbuilder.com/index-and-benchmark-engineering/strategy-indices/fixed-decrement-index/
Agent skill: `npx skills add IslamBaraka90/Fintech-Algorithms-Library` — https://docs.thefintechbuilder.com/guides/agent-skill/

## Install and import

```bash
npm install fintech-algorithms
```

```ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/strategy-indices/fixed-decrement-index";
```

## Signature

```ts
calculate(data)
```

Deducts a fixed number of index points per year. Decrement indices exist to make option pricing on them cheaper, and the deduction is a real drag borne by the holder — not a fee schedule.

## Parameters

| Name | Type | Required | Notes |
| --- | --- | --- | --- |
| `data` | `{ underlyingLevels: number[]; annualDecrementPoints: number; dayCount: number; baseLevel: number }` | yes | `dayCount` sets the convention used to pro-rate the annual figure; 360 and 365 give different answers. `baseLevel` is the index value at the start of the series; it scales the level but never the returns. |

## Returns

`{ dailyDeductions, levels, endingLevel }`

The deduction applied each day and the resulting level series.

## Errors

- When dayCount is not positive — throws

## Complexity

Time `O(n)`, space `O(n)`.

## Worked example

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

### Input

`data`:

```json
{
  "underlyingLevels": [100, 101, 100.5, 102, 103, 102.6],
  "annualDecrementPoints": 5,
  "dayCount": 360,
  "baseLevel": 100
}
```

### Call

```ts
calculate(data)
```

### Returns

object with 3 fields: dailyDeductions, levels, endingLevel

```json
{
  "dailyDeductions": [0.013889, 0.013889, 0.013889, 0.013889, 0.013889, 0.013889],
  "levels": [100, 100.986111, 100.472291, 101.957989, 102.943688, 102.530018],
  "endingLevel": 103.915174
}
```

## Verification and provenance

Tier: **verified** (via input-expected).

The worked example below is the figure published in this algorithm's article, replayed and asserted by the test suite on every build. The arithmetic cannot drift without the build failing.

Both tiers guarantee the signature. Full explanation: https://docs.thefintechbuilder.com/guides/verification/

Generated from the docs.json payload shipped inside fintech-algorithms@0.13.1.
The signature and parameter list are checked against the compiled implementation at build time,
so a description that contradicts the code fails the build rather than reaching this file.

## Links

- Article (how it works, step by step): https://thefintechbuilder.com/index-and-benchmark-engineering/strategy-indices/fixed-decrement-index/
- Implementation source: https://github.com/IslamBaraka90/Fintech-Algorithms-Library/blob/main/src/index-and-benchmark-engineering/strategy-indices/fixed-decrement-index/impl.ts
- Package on npm: https://www.npmjs.com/package/fintech-algorithms
- Domain index for agents: https://docs.thefintechbuilder.com/index-and-benchmark-engineering/llms.txt