Leveraged Daily-Reset Index

Install and import#

bash

npm install fintech-algorithms

import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/strategy-indices/leveraged-daily-reset-index";

Signature#

calculate(data)

Applies a leverage multiple that resets every day. Daily reset is why a 2× product does not deliver 2× over a month: in a choppy market, compounding the reset erodes the level even when the underlying ends flat.

Parameters#

Name	Type	Notes
`data`	`{ returns: number[]; leverage: number; dailyCost: number; baseLevel: number }`	`dailyCost` is the financing drag applied each day, which is what makes the long-run gap wider than volatility decay alone. `baseLevel` is the index value at the start of the series; it scales the level but never the returns.

Returns#

{ strategyReturns, levels, endingLevel, multiple }

The leveraged return series and levels.

Errors#

When leverage is not positive — 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

{
  "returns": [0.02, -0.015, 0.01, -0.025, 0.018, 0.006],
  "leverage": 2,
  "dailyCost": 0.0001,
  "baseLevel": 1000
}

Call#

calculate(data)

Returns#

object with 4 fields: strategyReturns, levels, endingLevel, multiple

{
  "strategyReturns": [0.0399, -0.0301, 0.0199, -0.0501, 0.0359, 0.0119],
  "levels": [1000, 1039.9, 1008.59901, 1028.67013, 977.133757, 1012.212859],
  "endingLevel": 1024.258192,
  "multiple": 2
}

Diagrams#

Calculation flow#

Leveraged Daily-Reset 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 Leveraged Daily-Reset Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]

Leveraged Daily-Reset 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#

S&P Dow Jones Indices Index Mathematics Methodology — S&P Dow Jones Indices
S&P DJI Equity Indices Policies & Practices — S&P Dow Jones Indices
FTSE Russell Capping Methodology — FTSE Russell, LSEG
FTSE Russell Index Policy and Methodology Library — FTSE Russell, LSEG
MSCI Global Investable Market Indexes Methodology Library — MSCI
MSCI Minimum Volatility Indexes Methodology — MSCI
S&P Risk Control 2.0 Indices Methodology — S&P Dow Jones Indices
Principles for Financial Benchmarks — International Organization of Securities Commissions
Regulation (EU) 2016/1011 — European Union
Portfolio Selection — Harry Markowitz
On the Properties of Equally-Weighted Risk Contributions Portfolios — Sébastien Maillard, Thierry Roncalli, and Jérôme Teïletche
Fundamental Indexation — Robert Arnott, Jason Hsu, and Philip Moore
FTSE Currency Hedging Methodology Overview — FTSE Russell, LSEG

Leveraged Daily-Reset Index

Install and import#

Signature#

Parameters#

Returns#

Errors#

Worked example#

Input#

Call#

Returns#

Diagrams#

Calculation flow#

How it works#

References#

The rest of the Strategy Indices family#