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Free-Float Market-Cap Index

Install and import#

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/weighting-and-capping/free-float-market-cap-index";

Signature#

calculate(data)

Weight by the shares that can actually be bought. Excluding strategic, government and insider holdings is what makes an index replicable — a fund cannot buy shares that are not for sale.

Parameters#

NameTypeNotes
data{ constituents: Constituent[] }Constituents carrying price, shares outstanding and a free-float factor.

Returns#

{ ids, floatMarketValues, weights }

Float-adjusted market values and the weights they imply.

Errors#

  • When a float factor 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
{
  "constituents": [
    {
      "id": "A",
      "price": 20,
      "shares": 1000000,
      "floatFactor": 0.65,
      "fx": 1
    },
    {
      "id": "B",
      "price": 40,
      "shares": 500000,
      "floatFactor": 0.9,
      "fx": 1
    },
    {
      "id": "C",
      "price": 30,
      "shares": 800000,
      "floatFactor": 0.5,
      "fx": 1.1
    }
  ]
}

Call#

calculate(data)

Returns#

object with 3 fields: ids, floatMarketValues, weights

{
  "ids": ["A", "B", "C", "D"],
  "floatMarketValues": [13000000, 18000000, 13200000, 12960000],
  "weights": [0.227432, 0.314906, 0.230931, 0.226732]
}

Diagrams#

Free-Float Market-Cap Index — article hero
Free-Float Market-Cap Index — failure guard
Free-Float Market-Cap Index — worked example

Calculation flow#

Free-Float Market-Cap 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 Free-Float Market-Cap Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Free-Float Market-Cap 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 Weighting and Capping family#