Synthetic-index prices are generated by algorithms and random number generators rather than by an underlying real-world market.
The behaviour of each synthetic index is determined by its predefined design.
Depending on the instrument, these characteristics may include:
- a defined volatility level;
- upward spikes;
- downward crashes;
- jumps; or
- other simulated market-like movements.
Synthetic indices are not directly affected by:
- economic data;
- interest-rate decisions;
- company earnings;
- geopolitical events; or
- movements in real-world financial markets.
Any apparent correlation between a synthetic index and a real-world market should therefore not be assumed to represent a direct relationship.