Borsa Istanbul plans to use leveraged, short indices
by Daily Sabah
ISTANBULMar 22, 2016 - 12:00 am GMT+3
by Daily Sabah
Mar 22, 2016 12:00 am
According to an announcement from the Borsa Istanbul stock exchange, it will start to calculate the leveraged indices and short indices, which offer to bring the same amount of return at less investment costs (leverage effect), in the event the market moves by a certain amount - in which the index will be reset - starting from April 1
The leveraged indices, which will be implemented in Turkey for the first time, are known to reflect an underlying reference index with a predetermined leverage ratio. At leveraged indices, it is assumed that the leverage is obtained by borrowing in order to make more investments, and the borrowing rate is based on one-day repurchase agreement (repo) rates. Hence, the index is calculated by subtracting the borrowing cost (BIST-KYD Repo Net Index Revenue) from the overall revenue based on the support index.
Also, for the short-term indices, it is assumed that the short position and the leverage are obtained through the purchase of shares on the index and short selling those shares. Moreover, the fund obtained from short selling is assumed to be evaluated at daily repo rates. Therefore, the index is calculated by summing up the interest rate revenue (BIST-KYD Repo (Net) Index Revenue) to the total revenue based on the underlying reference index.
The initial values of the leveraged and short indices, which Borsa Istanbul will start to calculate in Turkey for the first time, will be 1,000, and the indices will be calculated at the end of the day.