Synthetic indices do not derive their prices from an underlying real-world asset.
Instead, their prices are generated using algorithms and random number generators (RNGs) designed to create market-like price behaviour.
Each synthetic index has defined characteristics, which may include:
- a target level of volatility;
- upward or downward spike behaviour;
- jump behaviour; or
- other predefined price characteristics.
The pricing process operates independently of real-world news, company earnings, interest-rate decisions and economic data.
Because synthetic indices use generated prices rather than an underlying exchange-traded market, their pricing should not be interpreted as tracking or predicting any real-world asset.