Synthetic Index

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Synthetic Index

The purchase of futures contracts and/or options such that one's exposure and potential payout resemble that of an index. One creates a synthetic index if one believes doing so will result in a higher return than a security tracking a real index.
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Charts 1 to 4 show the total number of selected indexes classified into four thematic categories depending on their prevailing approach: synthetic indices of vulnerability from the perspective of social determinants of health; social and environmental and climatic conditions; family and the life course; and a territory and specific geographic areas.
In relation to the thematic categorization of synthetic indices described in the literature, as proposed in this article, it is important to mention that some of the areas present a certain level of overlap.
The last theme category showed vulnerability from the perspective of a territory and was represented by seven synthetic indices. The most common variables in this category were related to schooling, occupation, income, demographic characteristics and sanitation.
The literature review on indicators and methodologies adopted for the construction of synthetic indices evidences the existence of limitations to theoretically portray vulnerability.
Finally, synthetic indices can be important tools in the active management of territories and public health.
To realise how useful these four supplementary measures can be, it is worth recalling in which precise respect synthetic indices of legal CBI can be considered as subjective.