InvestorQ : What are the key terms I need to know about indexation and indexed assets?
Moii Chavate made post

What are the key terms I need to know about indexation and indexed assets?

Sam Eswaran answered.
2 years ago

Let us looked at Indexed asset, first! An indexed asset has coupon and principal payments that are adjusted upward in response to increase in price level. This adjustment is intended to compensate lenders for the decline in purchasing power of loan repayments.

Index Fund is a mutual fund which invests in a portfolio of shares that matches identically the constituents of a well known stock market index. Hence changes in the value of the fund mirror changes in the index itself.

Index futures is a futures contract based on an index, the underlying asset being the index, are known as Index Futures Contracts. For example, futures contract on NIFTY Index and BSE-30 Index. These contracts derive their value from the value of the underlying index.

Index option contracts are the options contracts, which are based on some index, are known as Index options contract. The buyer of Index Option Contracts has only the right but not the obligation to buy / sell the underlying index on expiry. Index Option Contracts are generally European Style options i.e. they can be exercised / assigned only on the expiry date.

Index Trusts are the trust funds in which investment strategy involves mirroring particular share market or fixed interest market index.