Financial Instruments — ISS & STOXX Glossary
About This Section
This glossary covers derivatives, exchange-traded products, structured products, and other financial instruments as they relate to index investing. Terms are sourced from STOXX and ISS Governance official documentation.
~50 terms across multiple sources.
B
Benchmark (as Instrument Reference)
▰▰▰▰▰▰▰ 5,507
Quote
“A benchmark is not a portfolio; it is the standard against which all portfolios are judged.”
— Charles D. Ellis, Winning the Loser’s Game (1998)
A standard index — such as the EURO STOXX 50 or STOXX Europe 600 — against which the performance of a portfolio, fund, or financial product is measured. When an index serves as a benchmark, it becomes the contractual reference point embedded in the terms of derivatives, ETFs, and structured products.
Note
a benchmark is the yardstick. When a fund manager says “we track the STOXX Europe 600,” that index is the benchmark instrument — the thing every return is compared against, and the thing that determines what the fund must hold.
Related Terms
Source excerpts (5)
1999 to Jul. 2016. Factors shown are the standard Axioma style factors. Note: cumulative factor exposures of a strategy relative to a benchmark do not generally add to zero as it is measured in terms of risk allocation.. STOXX LIMITED 9 STOXX MINIMUM VARIANCE INDICES 3 Why minimum v
— Stoxx Minvar Paper (PDF), p. 8
Their straightforward and transparent methodology means that they can be easily adopted to underlie financial products and to benchmark portfolios. Additionally, the availability of a futures market further helps the construction of an ESG portfolio by providing hedging and liquidity
— New Study: Gauging the Effect of ESG Exclusions Through the STOXX USA 500 ESG…
Maximum potential EPSC points are accrued for proposals with total costs at or less than approximately 65 percent of the ISS benchmark SVT (which is equivalent to the SVT “Allowable Cap” under prior policy). Market Value is calculated as the 200-day average share price (taken from Re
— Canadian Equity Plan Scorecard Faq (PDF), p. 14
Constituent selection is based on free-float market capitalization. The benchmark DAX is calculated as a total-return performance index, one of the few major country indices that also takes dividends into account. Today, the DAX fa
— Monthly Index News June 2023 (PDF), p. 4
Shares, Free Float, and Capping are reviewed quarterly. For the capping procedure, the benchmark is defined as the new composition of the STOXX Global 1800 which becomes effective on the review date on the 3rd Friday of March, June, September and
Bond (Fixed Income Security)
▰▰▰▰▰ 298
Quote
“Gentlemen prefer bonds.”
— Andrew Mellon
A bond is a fixed-income debt instrument in which an investor lends capital to an issuer (government, corporation, or supranational entity) in exchange for periodic interest (coupon) payments and the return of principal at maturity. In the index context, bonds serve as the underlying securities for fixed-income indices published by STOXX and as the instruments evaluated by ISS ESG for labeled-debt verification.
Note
a bond is an IOU with a schedule. You lend money, receive regular interest, and get your money back on a set date. Bonds are the building blocks of fixed-income indices and the raw material behind products like green bonds, corporate bonds, and sovereign bonds.
Related Terms
Source excerpts (5)
For example, if the option has a 10-year R Risk Free Rate Treasury term, the risk-free rate is the 10-year U.S. Government Bond Yield website on the date of grant. Term/Expected T Proxy Full term of the option. Life Base of Natural e N/A N/A Logarithm Natural Ln N/A N/A Logari
— Us Compensation Policies Faq (PDF), p. 6
TOXX Transatlantic 150 Index, iSTOXX Transatlantic 150 GR Decrement 50 Index, iSTOXX Eurozone 50 GR Decrement 50 Index and removed reference of STOXX Bond Index Guide » March 2023: Methodology update for EURO iSTOXX ESG-X & Ex Nuclear Power Multi Factor index » March 2023(2): Methodology update for iSTO
— Istoxx Index Guide (PDF), p. 40
It is a market norm for companies to include a clause for downward adjustment of the conversion price in their convertible bond issuance proposals for A shares. On the other hand, a similar mechanism for an upward adjustment is rarely seen. Companies generally propose to adjus
— Asia Pacific Policy Updates (PDF), p. 16
Limit Capping is a procedure that restricts the weighting of index constituents and prevents single bonds from dominating the index. The weight of a bond in the index is capped to 25 percent at the rebalancing date. In case 4 or fewer bonds satisfy the admission criteria of an index, included bonds are
— Guide To Eurogov Bond Indices (PDF), p. 6
Intraday 1300 Snapshot The file represents a snapshot with the underlying bond data at 13:00 CET. It contains, among other information, reference data, prices, weights and analytics. The file is publicly on Qontigo Website with
C
Call Option
▰▰▰▰ 119
Quote
“Derivatives are financial weapons of mass destruction.”
— Warren Buffett
A call option is a derivatives contract that grants the holder the right, but not the obligation, to receive the cash difference between the underlying index level and the strike price at expiry (for European-style contracts) or at any point before expiry (for American-style). On Eurex, call options on STOXX indices are European-style and cash-settled, and they are a core component of covered-call and volatility strategy indices.
Note
a call option is a bet that the index will go up. You pay a premium for the right to profit if the index rises above a set level (the strike price). If it does not, you lose only the premium you paid.
Related Terms
Source excerpts (5)
CALCULATIONS Total Return Version The Total Return version of the index combines the EURO STOXX 50 (Net Return) Index and a EURO STOXX 50 call option. On regular trading days the Total Return version is calculated as follows: 𝐸𝑆𝑇𝑋50(𝑁𝑅) [ 𝑡 𝐸𝑆𝑇𝑋50(𝑃) ]−𝐶 𝐸𝑆𝑇𝑋50(𝑁𝑅) 𝐸𝑋𝑃 𝑡 𝐼𝑛𝑑𝑒𝑥(𝑇𝑅) = 𝐸𝑋𝑃 𝐼𝑛𝑑𝑒𝑥(𝑇𝑅) 𝑡
— Stoxx Strategy Guide (PDF), p. 91
The value of each option entering the portfolio is calculated as the settlement value of the option adjusted by transaction costs. The Entry Value of call options should be lower than the option value, since they are sold, hence transaction costs should be negative.
— Istoxx Index Guide (PDF), p. 409
Gross returns in EUR, normalized at 100 on December 31, 2020. 1 The long DAX index component and the short call option component are held in equal notional amounts, i.e., the short position in the call option is “covered” by the long DAX index component. Copyr ight ©
— Monthly Index News November 2025 (PDF), p. 4
BW EURO STOXX 50 BuyWrite (Return) value Number 2 3 SX5EBP EURO STOXX 50 BuyWrite (Price) value Number 2 Regular day: Last price of the EURO STOXX 50 call option at time t 4 Ct Number 2 Rolling day: Settlement price of EURO STOXX 50 call option at the expiry date 5 Ct description Call option description (e.g.
— Index Files Guide 20230619 (PDF), p. 42
CALCULATION DAX Covered Call ATM index combines the DAX index and a DAX call option. On regular trading days the index is calculated as follows: DAX −C Index = t t Index t DAX − C EXP EXP 0 The rolling is carried out monthly on every
Certificate (Index Certificate)
▰▰▰ 37
An index certificate is an unsecured debt instrument issued by a bank that replicates the performance of an underlying index on a one-to-one (delta-one) basis. The holder participates directly in the gains and losses of the index without owning the constituent securities.
Note
Think of a certificate as a simplified way to “buy” an entire index through a single security. Unlike an ETF, a certificate is a note issued by a bank, which means you carry the credit risk of that bank. If the issuer defaults, you may lose your investment regardless of how the index performed.
Related Terms
Source excerpts (5)
𝑉 ∙( 𝐸𝑅,𝑡 + 𝑡−1 ∙𝑑) 𝑡 𝑡−1 𝐼𝑉 360 𝐸𝑅,𝑡−1 where: 𝐼𝑉 = Value of the EURO STOXX 50 Short Strangle ER Index (SX5ESSE) on day t 𝐸𝑅.𝑡 𝐾𝑊𝐶𝐷𝐶 = Korean 3-Month Certificate of Deposit rate (RIC: KRCD3M=KFIA)12 on day t 𝑡 𝑑 = number of calendar days between t and t-1 12 KRCD3M=KFIA is a submission-based benchmark [PAGE 8
— Stoxx Strategy Guide (PDF), p. 82
Adjustments to Par Value of Common Stock Stock that has a fixed per share value that is on its certificate is called par value stock. The purpose of par value stock is to establish the maximum responsibility of a stockholder in the event that a corporation
— 2016 Sri Us Voting Guidelines (PDF), p. 38
ZUG, August 27, 2020 – Qontigo has licensed the DAX® 50 ESG Index to the Austrian Raiffeisen Centrobank as an underlying for a certificate. The DAX 50 ESG index employs two complementary approaches to incorporate ESG principles into the selection criteria: standardized negative screens f
— DAX 50 ESG Index Licensed To Raiffeisen Centrobank | Press releases | STOXX
The STOXX® Global 1800 Index has been used by Cirdan Capital Management and SmartETN to issue a euro-denominated tracker certificate, the first investment product linked to the global benchmark. The certificate gives investors access to a basket of the world’s biggest companies and
— STOXX Global 1800 Index Qualities Highlighted by Structured Products Industry…
lations from Eastern Mediterranean University, a graduate degree in Strategy and Innovation from the University of Oxford-Said Business School, and a certificate in Algorithmic Trading from the University of Oxford Executive Programme.
— Serkan Batir joins Qontigo as Managing Director, DAX | Press releases | STOXX
Convertible Bond
▰▰▰▰ 90
Quote
“The convertible bond is the Swiss Army knife of fixed income — part bond, part equity option, always interesting.”
— John P. Calamos, Convertible Securities (1998)
A convertible bond is a hybrid fixed-income instrument that gives the bondholder the right to convert the bond into a predetermined number of the issuer’s equity shares. Convertible bonds combine characteristics of debt (fixed coupon, maturity date) and equity (upside participation through conversion). STOXX publishes convertible bond indices, and ISS governance evaluates the dilutive impact of conversion features on existing shareholders.
Note
A convertible bond is a bond with an embedded stock option. You receive regular interest like a normal bond, but if the company’s share price rises enough, you can swap the bond for shares and participate in the equity upside. If the share price stays flat, you simply hold the bond to maturity.
Related Terms
Source excerpts (5)
It is a market norm for companies to include a clause for downward adjustment of the conversion price in their convertible bond issuance proposals for A shares. On the other hand, a similar mechanism for an upward adjustment is rarely seen. Companies generally propose to adjus
— Asia Pacific Policy Updates (PDF), p. 16
Convertible Bonds Resolution Type: Special General Recommendation: Generally vote against the downward adjustment of the conversion price of A-share convertible bonds unless the proposed adjusted conversion price is deemed reasonable given the company’s justification; and the company is under extraordinary circums
— China Voting Guidelines (PDF), p. 11
This is, in essence, a general issuance mandate allowing companies to issue shares, convertible bonds, or GDRs up to a certain amount. The specific capital raising channel and usage of raised proceeds will be determined by the board at a later stage
— 2013Internationalpolicyupdates (PDF), p. 18
ital, trading a wide range of products: listed derivatives, cash equities, ETFs, bonds and foreign currencies. Paris-based Ellipsis AM specializes in convertible bonds, open funds and volatility overlay solutions. It ranks among the largest managers in convertible bonds.
— Dispersion Trading in Focus: Q&A with Optiver and Ellipsis AM | Blog post…
th or without preemptive rights. Companies routinely issue bonds directly to shareholders in order to raise funds while enjoying low borrowing costs. Convertible bonds give holders the choice of becoming shareholders, thereby increasing the shareholder base and liquidity of the company’s stock, or selling their new
— 2015 Taft Hartley Advisory Services International Guidelines (PDF), p. 24
Corporate Bond
▰▰ 17
Quote
“A promise made is a debt unpaid.”
— Robert W. Service
A corporate bond is a debt security issued by a corporation to raise capital, obligating the issuer to pay periodic interest and return the principal at maturity. Corporate bonds are rated by credit agencies as either investment grade or high yield. STOXX publishes corporate bond indices segmented by credit quality, sector, and geography, while ISS ESG screens corporate bond issuers for ESG risk factors.
Note
A corporate bond is a loan you make to a company. The company pays you interest (the coupon) on a regular schedule and gives your money back when the bond matures. The riskier the company, the higher the interest rate it must offer to attract buyers.
Related Terms
Source excerpts (5)
There is also abundant cash in financial markets ready to be deployed. In 2017, this caused multiple assets – from stocks to corporate bonds to private equity – to climb and even reach new highs. Central bank policy key for corporate bonds performance While most asset allocators consulted
— 2018 Outlook I: Economic Momentum Continues | Blog posts | STOXX
This presupposes that the investment can be limited to these activities, for example through green corporate bonds or a collaboration on infrastructure assets. The selection process consists of the following selection screens201: ICB Classification screening: - F
— Istoxx Index Guide (PDF), p. 1011
n controversial activities such as fossil fuels, military contracting, tobacco and gambling, among others. The Solactive ISS ESG Screened USD and EUR Corporate Bond Index Series provides investors with access to investment grade and high yield corporate bonds and is the latest fixed income addition to the family
— Screened Corporate Fixed Income Index Series Launched in Partnership with Sol…
ned across all sectors, though the underperformance was much more severe for financial securities. Figure 3 depicts excess returns of USD-denominated corporate bonds over US Treasury securities. In order to make returns comparable across sectors and time periods, the performance numbers were normalized to an aver
— Bank credit spread contagion – how bad could it get? | Blog posts | STOXX
14, compared with 2.44% at the end of 2016. The yield on 10-year German bunds, meanwhile, rose from 0.21% a year ago to 0.31%. The EURO STOXX 50® Corporate Bond index was little changed in the year, but returned 2% when including coupon payments. This article continues in a second part. 1,5 Net total returns
— 2017 Review: Global Economy and Risk-Taking Steam Ahead – Part I | Blog posts…
Covered Call Strategy
▰▰ 8
Quote
“Selling covered calls is the closest thing to a free lunch in the options world — you trade upside for income.”
— Lawrence G. McMillan, Options as a Strategic Investment (1980)
A covered call strategy on an index involves holding a long position in the index portfolio while simultaneously writing (selling) call options on that same index. The premium received from selling the calls provides additional income but caps the upside potential. STOXX publishes dedicated covered-call strategy indices, such as the EURO STOXX 50 Buywrite Index.
Note
you own the index and sell someone else the right to buy it above a certain price. You collect a premium for this, which boosts your income in flat or mildly rising markets, but you give up gains if the index surges past the strike price.
Related Terms
Source excerpts (5)
4 Monthly Index News / November 2025 Featured index Global X ETFs Europe last month launched the first ETF tracking an “at-the-money” (ATM) covered call strategy on the DAX® benchmark, offering low-cost and systematic exposure to a portfolio of German equities that also generates income from selling options. T
— Monthly Index News November 2025 (PDF), p. 4
4 Monthly Index News / November 2025 Featured index Global X ETFs Europe last month launched the first ETF tracking an “at-the-money” (ATM) covered call strategy on the DAX® benchmark, offering low-cost and systematic exposure to a portfolio of German equities that also generates income from selling options. T
— Stoxx Monthly Index Newsletter November 2025 (PDF), p. 4
Global X ETFs Europe has launched the first ETF tracking an “at-the-money” (ATM) covered call strategy on the DAX® benchmark, offering low-cost and systematic exposure to a portfolio of German equities that also generates income from selling options. T
— DAX covered call ETF launched in new Global X ETFs Europe, STOXX collaboratio…
ear but suffered heightened volatility — and losses — in March and April amid a global markets pullback. Figure 1 shows how the income generated by a covered call strategy on the EURO STOXX 50 compares with the dividend yield on the index. The former can be several times higher, depending on the period. Figure 1: Divide
— Global X ETFs Europe, STOXX launch first EURO STOXX 50 covered call ETF | Blo…
act Sarah Ball Executive Director, Communications press@iss-stoxx.com DAX Covered Call UCITS ETF (DYLD), the first ETF tracking an at-the-money (ATM) covered call strategy on the DAX® benchmark, offering low-cost and systematic exposure to a portfolio of German equities that also generates income from selling ATM option
— STOXX and Global X ETFs Europe collaborate on launch of Global X DAX Covered …
Credit Default Swap (CDS)
▰ 2
Quote
“Insurance is the only product that both the seller and buyer hope is never actually used.”
— Anonymous
A credit default swap is an OTC derivative contract in which one party (the protection buyer) pays a periodic premium to another party (the protection seller) in exchange for a contingent payment if a specified credit event — such as default or restructuring — occurs on a reference entity or bond. CDS spreads are widely used as market-implied measures of credit risk and feed into STOXX risk indices and ISS governance credit assessments.
Note
A credit default swap is essentially insurance against a borrower defaulting. You pay a regular fee, and if the borrower fails to pay its debts, you receive a payout. CDS spreads (the cost of this protection) are a real-time market signal of how risky the market considers a particular company or government.
Related Terms
Source excerpts (2)
f its Premier Global Filing Service to include all global markets, along with filing support on settlements without security identifiers, such as the Credit Default Swap and Euroyen settlements. This new global service is an extension of our current service offering for Global Filing clients, which historically covere
— Securities Class Action Services Announce Expansion of Offerings | ISS
f its Premier Global Filing Service to include all global markets, along with filing support on settlements without security identifiers, such as the Credit Default Swap and Euroyen settlements. This new global service is an extension of our current service offering for Global Filing clients, which historically covere
— Securities Class Action Services Announce Expansion of Offerings | ISS
D
Equity (as Instrument)
▰▰▰▰▰▰▰ 9,874
Quote
“Stocks have been the best-performing asset class over the long run, beating bonds, bills, gold, and real estate.”
— Jeremy Siegel, Stocks for the Long Run (1994)
Equity, in the context of financial instruments, refers to shares of ownership in a publicly listed company. Equities are the fundamental building blocks of stock indices — every STOXX and DAX index is ultimately a rules-based selection and weighting of equity securities. ISS Governance evaluates the governance practices of equity issuers, while ISS ESG rates their environmental and social performance.
Note
Equity means ownership. When you buy a share of stock, you own a small piece of the company and are entitled to a portion of its profits (dividends) and voting rights. Equity indices like the EURO STOXX 50 are simply structured collections of these ownership stakes, weighted by rules.
Related Terms
Source excerpts (5)
For non-employee director plans, vote for the plan if certain factors are met. Shareholder Value Transfer (SVT) The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of sharehold
— Sri Us Voting Guidelines (PDF), p. 49
ADROOM (FHR) Foreign headroom (FHR) is defined as FHR = (foreign ownership limit – foreign holdings) / foreign ownership limit STOXX WORLD EQUITY INDEX METHODOLOGY GUIDE 20/37 4. INDEX CHARACTERISTICS If the foreign ownership limit is not strictly positive, then the FHR is set equal to zero. In
— Stoxx World Equity Index Guide (PDF), p. 20
EO’s total compensation has increased from the prior year; • If an equity-based plan is on the agenda, the main source of the increase (over half) is equity based, where the CEO is a participant of the equity proposal. A pay for performance disconnect is defined as an increase in CEO’s total compensation
— 2013Canadianpolicyupdates (PDF), p. 9
A company’s 3-year burn rate relative to that benchmark is a factor in the Equity Plan Scorecard. 14. How does ISS calculate the burn rate and annual stock price volatility? A company’s adjusted annual burn rate is calculated as fo
— 1 U.S. Equity Compensation Plans Faq Dec 2016 (PDF), p. 10
LCULATIONS 0 𝑡=0 𝑛 𝐼 ={ 𝑡 (𝐼 +∑(𝐷𝑖𝑣𝑎𝑛𝑛𝑜𝑢𝑛𝑐𝑒𝑑 ∙𝐹𝑋 ∙𝐾 ∙(1−𝑊𝐻𝑇 )))∙𝑅 𝑡>0 𝑡−1 𝑖,𝑡 𝑖,𝑡 𝑖,𝑡 𝑖,𝑡 𝑡 𝑖=1 𝐴𝐷𝐽_𝐼 =𝐼 ∙∏𝑅 𝑡 𝑡 𝑡′ 𝑡′>𝑡 Where: • I is the unadjusted equity dividend index level • ADJ_I is the adjusted equity dividend index level for corporate actions • t refers to each index dissemination day. • n is the
ETF (Exchange-Traded Fund)
▰▰▰▰▰ 765
Quote
“The ETF is the most innovative financial instrument of the last two decades.”
— John C. Bogle, The Little Book of Common Sense Investing (2007)
An exchange-traded fund is an open-ended investment fund that trades on a stock exchange and seeks to replicate the performance of a specified index. ETFs are the dominant licensed product type on STOXX and DAX indices, with hundreds of ETFs tracking benchmarks such as the STOXX Europe 600 and EURO STOXX 50.
Note
An ETF lets you buy and sell a whole index as easily as a single stock. It holds (or synthetically replicates) the index constituents, charges a small annual fee, and its price stays close to the net asset value through an arbitrage mechanism involving authorized participants.
Related Terms
Source excerpts (5)
All calculations conducted by BlackRock. 2022 data refers to the previous ‘Next wave of ETF investors’ survey conducted by YouGov Plc between 12 August 2022 and 8 February 2023.
— BlackRock and STOXX combine on BlackRock’s launch of new ETFs tracking artifi…
Interestingly, the portfolio has also outperformed the benchmark. Since May 20 this year, the index underlies (in its price version) an exchange-traded fund managed by BlackRock’s iShares. Find out more about the DAX ESG Target’s methodology and performance in the latest Qontigo whitepaper. Chart 1 – DAX
— Monthly Index News May 2021 (PDF), p. 4
tfolio performance could be attributed to the selection of assets, index choice and static factor exposure.5 That means that when an investor buys an ETF, not only are they buying an entire market — they are also actively choosing an asset class, geography, an index methodology, a style and a factor ex
— Active Asset Managers and the Passive Boom | STOXX
But when you look at trading activity, the picture completely changes. These products can account for more than 15% of US ETF daily trading volume, according to some estimates.[1] A +3x Tesla ETP from Leveraged Shares, for example, is the most traded ETP on the London Stock
— Q&A with Leverage Shares: Five myths about leveraged ETPs | Blog posts | …
0 with a systematic control over currency fluctuations is a valuable addition to the index-based investment toolbox,” said Vincent Denoiseux, Head of ETF Investment Strategy at Amundi ETF, Indexing & Smart Beta. The benchmark for a continent With a fixed number of 600 components and spanning 17 countri
— Taking stock of the STOXX Europe 600’s record-breaking rally and its FX-hedge…
ETC (Exchange-Traded Commodity)
▰▰▰▰▰ 642
Quote
“Gold is money. Everything else is credit.”
— J.P. Morgan
An exchange-traded commodity is a debt security listed on an exchange that provides exposure to individual commodities or commodity indices. ETCs may be physically backed (holding the commodity) or synthetically backed (using derivatives). STOXX provides commodity-related benchmark indices that serve as underlyings for ETC products.
Note
An ETC works like an ETF, but for commodities — gold, oil, copper, agricultural goods. Because you cannot easily store barrels of oil in a fund, many ETCs use futures contracts or swaps to provide the exposure.
Related Terms
Source excerpts (5)
Style risk is the aggregate risk of the style factors in the EU4 model (e.g., Momentum, Value etc.). 5 The diversification ratio of a portfolio is defined as the ratio of the weighted average of the total risk forecasts for the assets in the portf
— When 40 is the New 30 – What DAX Gains Following Enlargement | Blog posts | S…
Such Client Information are related to any Real-Time feed events, such as technical release, Real time feed disruption, etc.. Client Information related to EUROGOV® Bond Index methodology or Index Governance decision are distributed by STOXX Ltd and available at www.stoxx.
— Guide To Eurogov Bond Indices (PDF), p. 8
Recent (GAAP) results on metrics such as return measures and growth in revenue, profit, cash flow, etc. — both absolute and relative to peers – may also be further examined to assess the rigor of goals and whether the quantitative analysis may be anom
— 2017 Canadian Compensation Faq (PDF), p. 17
S classification) or NED pay that exceeds that of the company’s executive officers. Performance awards, retirement benefits, excessive perquisites, etc. Inadequate disclosure or lack of clearly disclosed rationale in the proxy for unusual NED payments. This policy update allows for adverse vote rec
— Climate Us Policy Updates (PDF), p. 5
, or other aspects of the index methodology in a manner that is not in line with this index methodology, e.g. due to a mistake, incorrect input data, etc. 4.2.1. RULE-BASED CORRECTION STOXX corrects a calculation error without delay on the dissemination day it occurred, provided that STOXX becomes awar
ETN (Exchange-Traded Note)
▰▰ 7
Quote
“Credit is a system whereby a person who cannot pay gets another person who cannot pay to guarantee that he can pay.”
— Charles Dickens
An exchange-traded note is an unsecured, unsubordinated debt instrument issued by a bank that promises to pay the return of a specified index minus fees. Unlike an ETF, an ETN does not hold a pool of assets; the investor bears the full credit risk of the issuing institution.
Note
An ETN is essentially a bank’s IOU linked to an index. You get precise index tracking with no tracking error (since there is no portfolio to manage), but if the bank goes bust, you might get nothing. This is the key difference from an ETF.
Related Terms
Source excerpts (5)
This index has underlied over 15 structured products to date. Another one, the iSTOXX® MUTB Japan Empowering Women 30 Index, underlies an exchange-traded note in Japan, where former Prime Minister Shinzo Abe made ‘womenomics’ a topic of national interest. In another development to help investors integrate g
— Celebrating Women’s Advancement and the Role of Financial Markets | Blog post…
Though high level of interests, the selection of investment vehicles was very limited. We are pleased to successfully launch a 4-way ETN, 1x/-1x, 2x/-2x tracking VN30 futures in collaboration with Qontigo and KIS TRUE ETN.
— Four Vietnam-focused STOXX Indices Licensed to Korea Investment & Securit…
OXX MUTB Japan Low Carbon Risk 30 Index to Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (MUMSS). The index will be used as an underlying for an ETN to be listed on the Tokyo exchange on March 22. The iSTOXX MUTB Japan Low Carbon Risk 30 Index is derived from the iSTOXX MUTB Japan Quality 150 Inde
— Japan-focused low carbon STOXX index licensed to Mitsubishi UFJ Morgan Stanle…
Zug (November 26, 2020) – Qontigo has licensed three indices to Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., which underlie respective exchange-traded notes (ETNs) listed on the Tokyo Stock Exchange today. All three indices have a Japan focus: iSTOXX® MUTB Japan Empowering Women 30, iSTOXX® MUTB Japan ES
— Three Japan-Focused STOXX Indices Licensed to Mitsubishi Securities | Press r…
Qontigo and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (MUMSS) have joined forces with the listing of three exchange-traded notes (ETNs) in Japan, as demand for innovative index-based products grows in the Asian country. The notes track respectively the iSTOXX® MUTB Japan Empow
— Three Japan-Focused Notes Tracking STOXX Indices Listed by Mitsubishi Securit…
ETP (Exchange-Traded Product)
▰▰▰ 45
Exchange-traded product is the umbrella term encompassing ETFs, ETNs, and ETCs — any financial product that is traded on an exchange and derives its value from an underlying benchmark or asset. STOXX indices serve as the basis for a broad ecosystem of ETPs across global exchanges.
Note
ETP is the big tent. Whenever someone says “exchange-traded product,” they mean any of the exchange-listed wrappers (ETF, ETN, ETC) that give investors packaged access to an index, commodity, or strategy.
Related Terms
Source excerpts (5)
ETPs? “The index embodies the investment strategy offered to investors — a clear, rules-based and systematic methodology that is independent from the ETP’s management. This further ensures transparency, robustness and neutrality, as investors can gauge each ETP’s performance against that of the index i
— Q&A: Leverage Shares’ Kavrak on Single-Stock Short and Leveraged ETPs | B…
These products can account for more than 15% of US ETF daily trading volume, according to some estimates.[1] A +3x Tesla ETP from Leveraged Shares, for example, is the most traded ETP on the London Stock Exchange. That means leveraged ETPs punch far above their weight: they
— Q&A with Leverage Shares: Five myths about leveraged ETPs | Blog posts | …
ng than for market cap-weighting. A minimum variance index can be used directly as a benchmark for a passive or active mandate or as the basis for an exchange-traded product or custom notes. The index provides a way for passive investments to hold a portfolio on the efficient frontier.
— Stoxx Minvar Paper (PDF), p. 27
Pursuing the strategies through an ETP, however, brings cost, risk and operational benefits. Among those benefits, an ETP does not require a margin account nor any margin levels. There are no extra costs for holding a position overnight.
— New batch of single-stock short and leveraged ETPs tracking STOXX indices lau…
We focus our analysis on the highest two tiers of the classification: Industry and Supersectors. Investors, exchange-traded product (ETP) and structured-product issuers, market makers, and any others using these indices as investment underlyings or as benchmarks could see their strateg
— New ICB Classification: Impact from a Risk-Oriented Perspective | Whitepapers…
Eurex Futures
▰▰ 10
Eurex futures are standardized, exchange-traded derivatives contracts listed on Eurex Exchange (a subsidiary of Deutsche Boerse, the parent company of STOXX). Key contracts include the EURO STOXX 50 Index Future, the STOXX Europe 600 Index Future, and the DAX Future. These are among the most liquid equity index derivatives in the world.
Note
Eurex futures let you make a binding agreement today to buy or sell the value of an index at a future date. They are used by institutional investors for hedging, speculation, and portfolio overlay strategies. Daily settlement is marked to market.
Related Terms
Source excerpts (5)
CONSEQUENCES OF AN INDEX DISRUPTION EVENT If an index disruption event in relation to the Eurex futures contract occurs on index dissemination days, then STOXX Ltd. will calculate the value of the index based on the most recent prior futures prices publ
— Stoxx Strategy Guide (PDF), p. 41
“Because we were looking for tradeable benchmark indices which are compliant with our responsible investment policy, we were among the first to trade Eurex futures on the STOXX Europe 600 ESG-X Index,” said Magnus Linder, Head of Derivatives at Swedbank Robur, one of Scandinavia’s largest asset managers.
— Eurex Launches Futures on STOXX USA 500 ESG-X | Blog posts | STOXX
ad, but, unlike the case with cash shares, they are not liable for the increasing or decreasing market value of the position’s constituents. Finally, Eurex futures have on-screen prices provided by market makers, which allows users to leave limit orders at set spread levels. “Trading through on-exchange futures
— Spread Ratio Indices Help Trade Relative Value Between Related Securities | B…
the region’s military capabilities. The ETF has received regulatory approval and will be listed on main European stock exchanges in coming days. The Eurex futures started trading on May 12. The STOXX Europe Total Market Defense Capped index was introduced in March and selects European companies[1] from ICB’s Ae
— Amundi ETF, Eurex launch products tracking STOXX Europe Total Market Defense …
d into the following month’s contract over the roll period. CONSEQUENCES OF AN INDEX DISRUPTION EVENT If an index disruption event in relation to the EUREX futures contract occurs on index dissemination days, then the following applies: STOXX Ltd.
F
Futures Contract (Index Futures)
▰▰▰▰ 90
Quote
“Futures markets transfer risk from hedgers to speculators — that is their economic purpose.”
— Merton H. Miller, Nobel Prize lecture (1990)
An index futures contract is a standardized agreement to exchange, at a predetermined future date, a cash amount equal to the difference between the agreed price and the index level at expiry. Index futures are among the most widely traded derivatives globally, and STOXX/DAX indices underlie some of the highest-volume futures contracts on Eurex.
Note
an index future is a bet on where the index will be at a specific date. You never receive actual shares — everything is settled in cash. Futures are popular because they offer leverage (you post margin, not the full notional value) and high liquidity.
Related Terms
Source excerpts (5)
Rolling period refers to the length of transition from the 1st nearby futures contract into the 2nd contract. The futures roll is completed on the date preceding the last trading day of each futures contract series. Dissemination Calend
— Stoxx Strategy Guide (PDF), p. 67
This allows investors based in Brazil to access two leading European index futures via their home market and without any currency risk. B3 already offers similar foreign benchmarks in the original currency but cleared in BRL. “The l
— B3 to introduce EURO STOXX 50 and DAX Derivatives as Qontigo grows its footpr…
17, when almost 70,000 contracts traded ahead of the Dec. 20 roll. STOXX Europe 600 ESG-X Index futures are the most popular in a suite of six STOXX ESG derivatives listings on Eurex. Chart 1: Notional value of FSEG trades The number of outstanding STOX
— STOXX ESG Derivatives Reach Record Volumes | Blog posts | STOXX
Pool B.2 encompasses Treasury-fixed income securities or any derivative that allows for delivery of such a Treasury security such as a Treasury futures contract. Pool B.3 encompasses Eurodollar futures contracts or any derivative that provides for delivery of a Eurodollar futures contract such as Eurodollar o
— ISDAfix Settlement Exceeds $500 Million | ISS
= index value on day t 𝑡 𝐿 = leverage (1, 2, -1, -2) F 𝑤 = weight of kth VN30 futures contract on close of day t 𝑘,𝑡 𝐹 = settlement price of kth VN30 futures contract on day t (mid quote for real-time 𝑘,𝑡 U calculation) 𝑀𝑅 = margin rate135 T 𝐼𝑅 = Korean Overnight Call Rate (RIC: KRCALL=BOKK) on day t 𝑡 𝑑 = number o
G
Green Bond (as Instrument)
▰▰▰ 28
Quote
“Green bonds channel private capital toward the climate transition — they make the bond market part of the solution.”
— Sean Kidney, CEO of Climate Bonds Initiative
A green bond is a fixed-income instrument whose proceeds are exclusively allocated to finance projects with environmental benefits — renewable energy, energy efficiency, clean transportation, or sustainable water management. ISS ESG provides second-party opinions (SPOs) and verification services for green bond issuances, while STOXX publishes green bond indices that track this market segment.
Note
A green bond works exactly like a regular bond (fixed coupon, maturity date, credit risk), except the issuer commits to spending the money raised on environmentally beneficial projects. ISS ESG verifies whether the bond actually meets green standards.
Related Terms
Source excerpts (5)
2022 across an array of regulatory areas (taxonomies, ESG and climate risk management and disclosures, product requirements, ESG in stewardship, and green bond frameworks). - Regulatory efforts continue to prioritize management of climate-related financial risk as well as preventing greenwashing, although th
— The Depth & Breadth of Sustainable Finance Regulatory Initiatives: Global…
’ boards, which may limit the company’s ability to monitor the conducts of these subsidiaries. Therefore, the release of restrictions is acknowledged as instrumental at large conglomerates that need the flexibility to spread board expertise and transact business throughout companies within the group.
— Taiwan Voting Guidelines (PDF), p. 12
Scholes will present on the importance of risk management in an evolving asset-management landscape. His research on pricing exchange-listed options was instrumental in facilitating the multi-billion market of derivatives, and I am extremely pleased to have him enrich the day’s discussion. Panels with leading ex
— STOXX Annual Conference to Discuss Future of Investing | Blog posts | STOXX
By using the Carbon Yield, investors can ensure that the mitigation impacts of their green bond holdings are being calculated consistently. The new Carbon Yield Insights Report summarizes the experience and five key findings in applying the Carb
— Carbon Yield Insights Report Summarizes Experience of Applying Carbon Yield O…
The index is open to many issuers, offering multiple investment opportunities for investors, particularly in the green bond format. “We also have the flexibility with the Euro iSTOXX Ocean Care 40 and the iSTOXX USA Ocean Care to add a synthetic dividend, while maintaining
— Q&A with SILEX: Ocean Care indices as targeted sustainability strategy fo…
High-Yield Bond
▰ 2
Quote
“There are no bad bonds, only bad prices.”
— Michael Milken, pioneer of the high-yield bond market
A high-yield bond (also known as a “junk bond”) is a fixed-income instrument rated below investment grade (below BBB- by S&P/Fitch or Baa3 by Moody’s) that offers a higher coupon to compensate investors for elevated default risk. STOXX publishes high-yield bond indices that serve as benchmarks for this market segment, and ISS ESG screens high-yield issuers for governance and sustainability risks that may compound credit risk.
Note
A high-yield bond pays more interest because the issuer is riskier — it has a lower credit rating and a higher chance of defaulting. Investors accept this risk in exchange for the extra income. High-yield indices track the performance of this riskier corner of the bond market.
Related Terms
Source excerpts (2)
markets equities and multi-factor equity were among categories that drew record amounts of money in 2018, BlackRock said, while European equities and high-yield bonds suffered net outflows. The STOXX® Global 1800 Index dropped 9.1% during 2018,2 its steepest retreat since the global financial crisis in 2008.
— ETF Assets Grow to Record High Despite Market Drop | Blog posts | STOXX
esting. The STOXX ICE Fixed Income Sustainability indices cover the investment-grade segment in US dollars, euros, sterling and other currencies, and high-yield bonds in dollars and euros. They are constructed to comply with, and exceed, the European Union’s Paris-aligned Benchmark (PAB) and Climate Transition Ben
— STOXX and ICE launch fixed income climate indices | Blog posts | STOXX
I
Index Fund
▰▰▰ 50
Quote
“The index fund is a sensible, serviceable method for obtaining the market’s rate of return with absolutely no effort and minimal expense.”
— John C. Bogle, The Little Book of Common Sense Investing (2007)
An index fund is a collective investment scheme — mutual fund, unit trust, or similar vehicle — that aims to replicate the performance of a specified benchmark index by holding its constituent securities in proportion to their index weights. Unlike ETFs, traditional index funds are bought and sold at end-of-day NAV, not intraday on an exchange.
Note
An index fund is the original passive investment. You give money to the fund manager, they buy every stock in the index in the right proportions, and your return matches the index (minus a small fee). The key difference from an ETF is that you transact at the day’s closing price, not in real time.
Related Terms
Source excerpts (5)
The worst-performing active funds register a significantly weaker performance than the poorest index funds. And around the median, active funds show little if any outperformance relative to the median index fund. “When performance is measured using before
— Index Funds Have Skill, Outshine Active Investors | Blog posts | STOXX
nd low leverage, generally indicating lower financial risk, more stable earnings, and durable business models. - The L&G Developed World Value Factor Index Fund tracks the iSTOXX L&G Developed World Value Index NTR and provides exposure to companies that appear undervalued compared to comparable companies. Ea
— STOXX and L&G collaborate on launch of three L&G developed world fact…
Passive funds’ fees have fallen in recent years, with Fidelity Investments this year unveiling the first index funds that command zero management fees. Active funds have had to follow with fee reductions of their own.2 The study also assesses active funds based on
— Active Vs. Passive Returns: A Barometer | Blog posts | STOXX
ustained economic growth will help corporate earnings. Factor Investing STOXX and L&G collaborate on launch of three L&G developed world factor-based index funds STOXX Ltd. today announced its expanding collaboration with L&G, with L&G’s launch of three developed world factor-based index funds tracking custom
With a management fee of 0.64 per cent, the Coincapital STOXX Blockchain Patents Innovation Index Fund (LDGR) and the Coincapital STOXX B.R.AI.N. Index Fund (THNK) began trading on Thursday morning on the Toronto Stock Exchange. “Canadians know technol
— Coinsquare moves into ETF business with two new funds - The Globe and Mail
Index License
▰▰ 7
An index license is the contractual agreement granting a financial institution the right to use a STOXX or DAX index as the basis for a financial product — ETF, futures contract, structured product, or fund. STOXX Ltd. (part of the ISS STOXX group under Deutsche Boerse) charges licensing fees, typically as basis-point charges on assets under management or per-contract fees for derivatives.
Note
Before a bank can launch an ETF on the EURO STOXX 50, it must obtain a license from STOXX. This license spells out how the index data may be used, what products are covered, and what fees are owed. Index licensing is a major revenue stream for index providers.
Related Terms
Source excerpts (5)
ake decision. Stakeholders mean (a) persons or entities who have overall concept or the nature of the index are generally considered non-material. an index license with STOXX regarding a benchmark administered by STOXX (Subscriber) and/or as far as The IMC determines whether an amendment is STOXX is reasonable a
— Detailed Overview Of Equity Index Calculation Changes (PDF), p. 27
ers that can reasonably be expected to be affected (“stakeholders”) before taking a decision. “Stakeholders” mean (a) persons or entities who have an index license with STOXX regarding a benchmark administered by STOXX (“subscribers”) and/or, as far as STOXX is reasonably aware, (b) persons or entities and/or th
— Dax Equity Index Methodology Guide 5526498614 (PDF), p. 101
a STOXX consults with reasonably affected stakeholders (“Stakeholders”) prior to take decision. Stakeholders mean (a) persons or entities who have an index license with STOXX regarding a benchmark administered by STOXX (Subscriber) and/or as far as STOXX is reasonable aware (b) persons or entities and/or third p
— Guide To Eurogov Bond Indices (PDF), p. 22
its platforms to match markets’ and clients’ demand for integrity, governance, surveillance and stability. To create a smooth transition and help DAX index licensees familiarize themselves with the new Index Data Distribution System, STOXX will run a simulation phase between December 18, 2023, and February 29, 2
— DAX indices overhaul continues with methodology, data reporting changes | Blo…
a STOXX consults with reasonably affected stakeholders (“Stakeholders”) prior to take decision. Stakeholders mean (a) persons or entities who have an index license with STOXX regarding a benchmark administered by STOXX (Subscriber) and/or as far as STOXX is reasonable aware (b) persons or entities and/or third p
Index Option
▰▰▰▰ 101
Quote
“Options are the building blocks of any payoff structure an investor can imagine.”
— Robert C. Merton, Theory of Rational Option Pricing (1973)
An index option is a derivatives contract that gives the holder the right, but not the obligation, to receive (call) or pay (put) the cash difference between the index level and the strike price at or before expiry. STOXX-based index options are primarily traded on Eurex and are European-style (exercisable only at expiry) and cash-settled.
Note
An index option is like insurance — or a lottery ticket — on the index’s direction. A call option profits when the index rises above the strike; a put option profits when it falls below. You pay a premium upfront for this right.
Related Terms
Source excerpts (5)
Index and EURO STOXX 50® Volatility of Volatility Index (V-VSTOXX). The VSTOXX and VDAX measure the implied volatility of EURO STOXX 50 Index and DAX Index options, respectively, across their entire expiration curve. The V-VSTOXX measures the implied volatility of options on VSTOXX futures, hence reflecting exp
— Monthly Index News April 2021 (PDF), p. 31
S If one of the conditions below apply, the end of day index level is updated using 𝐼𝑉 =𝐼𝑉 : 𝑡 𝑡−1 Trading Disruption: EURO STOXX 50 index futures or index options are not available for trading any time during the last hour of trading (from 16:30 to 17:30 CET) except on a Eurex holiday. Exchange Disruption: Eur
— Stoxx Strategy Guide (PDF), p. 81
Options on the index represent about 60% of the volume in our equity index options segment. Both Eurex and the EURO STOXX 50 are placed at the heart of Europe, and they are the first choice when investors gain exposure to our regio
— 25 years forging better markets: Eurex and STOXX celebrate unique partnership…
for overall shifts in the term structure and at the same time have a dedicated exposure towards a specific expiry,” said Semroch. Difference between index options and volatility futures VSTOXX futures can be a more accurate market hedge than other products when trading around specific events.
— VSTOXX futures see increased activity amid market pullback and ahead of Frenc…
1 Featured Index This month’s Featured Index is the EURO STOXX 50® Volatility (VSTOXX) Index, which measures the implied volatility of EURO STOXX 50® Index options across their entire expiration curve. The VSTOXX (green line) ticked lower during August, reaching a month low of 15.8 on Aug.
Interest Rate Swap
▰ 3
An interest rate swap is an OTC derivative contract in which two counterparties agree to exchange interest-rate cash flows — typically a fixed rate for a floating rate — on a notional principal amount over a specified period. Interest rate swaps are the most widely traded OTC derivative globally and are used by institutional investors, banks, and corporates to manage interest-rate risk. STOXX provides swap-rate-based indices and ISS governance frameworks assess counterparty risk in swap exposures.
Note
An interest rate swap is a deal where two parties trade interest payments. One pays a fixed rate; the other pays a floating rate that changes with the market. No principal changes hands — only the difference in interest. Companies use swaps to lock in borrowing costs or hedge against rate movements.
Related Terms
Source excerpts (1)
, ICAP Capital Markets LLC (“ICAP”), was supposed to calculate a “reference rate,” which was to be ICAP’s estimate of the average trading rate of USD interest rate swaps of various tenors at 11:00am. ICAP circulated the reference rates to the Defendant Banks, “polling” each of them as to the bank’s actual bid/offer s
Labeled Debt
▰ 1
Labeled debt refers to any bond or debt instrument that carries a formal environmental or social label — Green, Social, Sustainability, or Sustainability-Linked. ISS ESG provides data coverage, screening, and second-party opinions for the labeled debt market, enabling investors to assess the credibility of these labels and integrate them into portfolio construction.
Note
“Labeled debt” is the catch-all for bonds that come with an official tag declaring their purpose. The label signals to investors that proceeds (or the issuer’s targets) are tied to sustainability goals. ISS ESG’s role is to verify that the label is not just marketing.
Related Terms
Source excerpts (1)
Investment Management Process Our Sustainability Bond Rating provides a relevant assessment of the ESG and climate impact and risk exposure of global labeled debt. It also allows investors to assess how compliant their Green, Social, Sustainability, Transition, and Sustainability-linked fixed income securities
Money Market Fund
▰ 1
A money market fund is a type of mutual fund that invests in short-term, high-quality debt instruments — treasury bills, commercial paper, certificates of deposit, and repurchase agreements — with the objective of preserving capital and providing liquidity. ISS governance frameworks assess money market fund boards and risk management practices, while STOXX money-market indices track short-term interest-rate benchmarks used for fund performance comparison.
Note
A money market fund is the closest thing to a savings account in the investment world. It holds very short-term, very safe debt and aims to never lose money. The returns are modest but steady, and you can typically withdraw your funds at any time. These funds are benchmarked against overnight or short-term rate indices.
Related Terms
Source excerpts (1)
ied to the iSTOXX Top Citywire Fund Managers Fixed Weights BE Index that targets a volatility of 6% by allocating to both the fund index as well as a money market fund. In addition, a constant dividend markdown is applied to the index expressed in percent of the index performance that is subtracted on an accrued bas
Municipal Bond
▰▰ 6
A municipal bond (muni bond) is a debt security issued by a state, city, county, or other local government entity to finance public projects such as infrastructure, schools, and hospitals. Municipal bonds are particularly prominent in the U.S. market and often carry tax-exempt status. ISS ESG evaluates municipal issuers for governance quality and sustainability alignment, while index providers track municipal bond performance through dedicated benchmarks.
Note
A municipal bond is a loan to a local government. The city or state uses the money to build roads, schools, or water systems, and pays you back with interest. In the U.S., the interest is often exempt from federal (and sometimes state) income tax, making munis attractive to high-tax-bracket investors.
Related Terms
Source excerpts (2)
At the ESG Frontier: Understanding the U.S. Municipal Bond Market JULY 22, 2021 KEY TAKEAWAYS:
- As the responsible investment market matures, it is extending its reach into parts of the world of finance that
— At the ESG Frontier: Understanding the U.S. Municipal Bond Market | ISS
SUSTAINABILITY SOLUTIONS / RATINGS & RANKINGS ESG MuniQuality Score Assess the performance of U.S. municipal bonds with a unique scoring solution. Municipal bonds can play a large role in shifting capital flows to investments that address societal issues and have
O
Passive Investment
▰▰▰ 33
Quote
“By periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals.”
— Warren Buffett
Passive investment is an investment approach that seeks to replicate the performance of a market index rather than outperform it through active security selection. The growth of passive investing has been the primary driver of demand for STOXX and ISS index products, as assets flow into index-tracking ETFs, index funds, and index-based mandates.
Note
Passive investing means you buy the index and hold it. You do not try to pick winning stocks or time the market. The philosophy is that most active managers fail to beat the index after fees, so matching the index cheaply is the better long-term strategy.
Related Terms
Source excerpts (5)
ther innovation.” We invite you to download the paper and explore its methodology and results. [1] STOXX, “Understanding Investor Preferences through Passive Investment Flows,” February 2024.
— New paper explores investor preferences through passive investment flows | Bl…
sitive portfolios increasing, the cost of implementing a transition to a “green” portfolio is a key consideration for both producers and consumers of passive investment products. Here, we analyze the costs of transitioning to two versions of a climate-based portfolio and compare them to the implementation costs of tr
This is the result of the sophistication of asset management in general and of passive investments in particular. And one of the positive outcomes of the global financial crisis. 1De, Indrani and Clayman, Michelle, ‘The Benefits of Socially Respon
— The New Faces of Risk Management | Blog posts | STOXX
AI processes are important to assist our best index researchers, rather than to replace them. Index as a passive investment vehicle has always benefited from rules-based and transparent methodologies, so that the outcome is a solution that is objective and easy to understa
— New horizons in thematic investing | Blog posts | STOXX
alternative risk premia, where they can use an index to draw higher returns but at a lower risk rate.” Where is STOXX positioned amid this growth in passive investments? “We are innovators in the index space. We want to be where clients are just starting to think of going to next.
— 2018 Seen as Another Record Year for Asia ETFs | Blog posts | STOXX
Portfolio Replication
▰ 2
Portfolio replication is the process by which a fund or product recreates the performance of an index. Full replication holds every constituent in exact index weight. Sampling (or optimized replication) holds a representative subset. Synthetic replication uses swaps or derivatives to match the index return without holding the underlying securities.
Note
Replication is the mechanics behind passive investing. Full replication is the most transparent — you own every stock in the index. Sampling reduces trading costs in large indices (like the STOXX Europe 600) by holding a representative basket. Synthetic replication uses a swap with a bank to guarantee the index return.
Related Terms
Source excerpts (1)
’s first total return futures (TRFs) tracking collateral indices, offering an alternative to bilateral swaps for buy-side investors who use synthetic portfolio replication. Qontigo has licensed the iSTOXX® Europe Collateral Index and iSTOXX® Europe EUR Group 1 Collateral Large Index1 for the futures.
— Qontigo and Eurex Launch First Collateral Indices Total Return Futures | STOXX
Put Option
▰▰▰▰ 189
Quote
“A put option is portfolio insurance — the premium is the price of sleeping at night.”
— Myron Scholes & Fischer Black, pioneers of options pricing theory (1973)
A put option is a derivatives contract that grants the holder the right, but not the obligation, to receive the cash difference between the strike price and the underlying index level at expiry (for European-style contracts). Put options on STOXX indices are traded on Eurex and are widely used for portfolio hedging — protecting against index declines — as well as for directional speculation and volatility strategies.
Note
A put option is the mirror image of a call option. You pay a premium for the right to profit if the index falls below a set level. Fund managers commonly buy puts as portfolio insurance — if the market drops, the put pays out and offsets losses in the portfolio.
Related Terms
Source excerpts (5)
Voting Guidelines › Terms of the debts - Are the debt instruments convertible into equity? What are the interest rate and maturity dates? Any call or put options? Often these terms will not be determined until the time of issuance of debt instruments (or when the actual loan agreement is signed).
— 1 2016 Hongkong Voting Guidelines Dec 2015 (PDF), p. 11
8m 6/3 (Return) value Number 2 3 SX5PP8P EURO STOXX 50 Protective Put 80% 18m 6/3 (Price) value Number 2 Regular day: Last price of the EURO STOXX 50 put option at time t 4 Pt Number 2 Rolling day: Settlement price of EURO STOXX 50 put option at the expiry date 5 Pt description Put option description (e.g.
— Index Files Guide 20230619 (PDF), p. 45
This strategy combines an index investment with an options position. It involves buying a put option while simultaneously purchasing the option’s underlying. The index is based on the DAX-index and a long position in a DAX put option traded at Eurex.
— Dax Strategy Index Guide (PDF), p. 8
The Options which are going to compose the portfolio are chosen based on the definitions given in the Notional Option Table in section 0: • Quarterly put options and monthly call options, with 1 to 3 call options for every put option; • The put option can be Shorter Dated or Longer Dated; • The call options c
— Istoxx Index Guide (PDF), p. 408
Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price. Vote for shareholder proposals to put option repricings to a shareholder vote. ISSGOVERNANCE.COM 53 of 93 UNITED STATES 2020 SRI PROXY VOTING GUIDELINES Stock Plans in Lieu of Cash So
R
REIT (Real Estate Investment Trust)
▰▰▰▰ 163
Quote
“Real estate cannot be lost or stolen, nor can it be carried away.”
— Franklin D. Roosevelt
A REIT (Real Estate Investment Trust) is a company or trust that owns, operates, or finances income-generating real estate and is structured to distribute the majority of its taxable income to shareholders as dividends. REITs trade on stock exchanges like ordinary equities and are included in STOXX equity indices, often within dedicated real estate sector sub-indices. ISS Governance assesses REIT board structures, related-party transactions, and governance practices specific to the real estate sector.
Note
A REIT lets you invest in real estate without buying property directly. The REIT owns buildings — offices, shopping centres, warehouses, apartments — collects rent, and passes most of the income to you as dividends. REITs appear in STOXX indices as a distinct sector, and their governance is scrutinized by ISS because of unique conflicts of interest (such as deals between the REIT and its management company).
Related Terms
Source excerpts (5)
36 82. What is the policy on stock-in-lieu-of-cash plans? … 37 83. A non-REIT company would like ISS to consider its limited partnership (LP) units as part of the company’s common shares outstanding when determining market capi
— 2015 Us Comp Faqs (PDF), p. 7
With a specialized statute facilitating the formation of REITs and a state judiciary that has developed REIT expertise, Maryland is the legal domicile of choice for most publicly-traded U.S. REITs.
— 2016 2017 Iss Policy Survey Results Report (PDF), p. 12
CE MECHANICS FPA and EVA Metric Exceptions The FPA will not be applied in the following cases: ▪ The subject company is part of GICS industry 601010, Real Estate Investment Trusts (REITs). ISS is currently refining its EVA methodology around classifying REITs and the requisite adjustments for their EVA calculation. ▪ The subje
— Pay For Performance Mechanics (PDF), p. 15
1.1, a minimum free float of ten percent is required for inclusion in the DAX selection indices. Daimler Truck Holding AG will replace alstria office REIT AG in the MDAX index. This change will become effective on 11 February 2022. MDAX® is a registered trademark of Qontigo Index GmbH. Media Contact Gen
— Unscheduled change in MDAX - February 8, 2022 | Press releases | STOXX
Investment Companies Investment companies are pooled investment vehicles such as closed-ended investment trusts, venture capital trusts, and real estate investment trusts that operate as funds, among others. These companies differ significantly in terms of structure from the majority of companies covered by the UK and
S
Social Bond
▰ 4
A social bond is a fixed-income instrument whose proceeds are allocated to projects that address or mitigate a specific social issue — affordable housing, access to healthcare, food security, or employment generation. ISS ESG provides second-party opinions and data on social bond issuances, verifying alignment with the ICMA Social Bond Principles.
Note
A social bond is the society-focused cousin of the green bond. The money raised goes to projects that help people — building hospitals, funding microfinance, or providing clean water. ISS ESG checks that the projects genuinely deliver social benefits.
Related Terms
Source excerpts (2)
l Bonds, as issuers around the world raced to combat related issues such as poverty, inequality, and food insecurity. - One of the key challenges for Social Bonds lies in measuring their outcomes – there is a growing appetite in the market for the development of relevant Key Performance Indicators. - While the
— The S Factor: Social Impact Considerations in the ESG Fixed-Income Market | ISS
n the Green Bond Standard and discussion of implications for investors; - Market-wide research results on the sustainability credentials of green and social bonds; - Analysis insights into potential avoided emission quantifications of green bonds. SPEAKERS - Aila Aho, Executive Adviser, Nordea - Viola Lutz, Vi
Sovereign Bond
▰▰ 7
Quote
“The power to tax is the power to destroy.”
— John Marshall
A sovereign bond is a debt security issued by a national government to finance public spending. Sovereign bonds are typically denominated in the issuing country’s currency and are considered among the safest fixed-income instruments (for developed-market issuers). STOXX publishes sovereign bond indices covering euro-area and global government debt, while ISS ESG assesses sovereign issuers on governance quality, human rights, and environmental factors through its Country Rating methodology.
Note
A sovereign bond is a loan to a country. Germany, France, the United States, and Japan all issue sovereign bonds to fund their budgets. Because governments can tax their citizens (and, in some cases, print currency), their bonds are generally regarded as low-risk — though this varies greatly by country.
Related Terms
Source excerpts (5)
Interest rates, which support banks’ net interest margin and profitability, declined in both the Eurozone (Figure 3) and the UK. Sovereign bond yields rose over the year in Germany and France but fell in the UK. Germany elected Friedrich Merz as chancellor with a reform agenda, while France r
— European bank stocks have record year, lifting sector STOXX ETF assets above …
M and Eurex. In the US session, we’ll first hear from the World Bank’s Katya Gratcheva on how sustainability factors are permeating the portfolios of sovereign bonds. We are also pleased to have sustainability experts from two of the world’s largest money managers — LGIM and Invesco — who will discuss the practic
— Join Us at the Qontigo Investment Intelligence Summit on Dec. 9 | Blog posts …
The World Bank’s Katya Gratcheva said during her presentation that current such scores in the sovereign bond market carry inherent biases. We’ll report on Gratcheva’s views in a separate article. Impact investing Another strategy that has emerged as a Europe
— Qontigo Summit: ‘Europe Must Lead in Standardization of ESG Data’ | Blog post…
ules before reaching a compromise to increase its budget deficit by less than earlier expected. The worsening of financial conditions including wider sovereign bond spreads will more than offset the stimulus provided by fiscal easing, according to Goldman Sachs.3 In the UK, the government and Parliament will deci
— 2019 Market Outlook II – Dollar Down, Risk Up? | Blog posts | STOXX
s as issuers come up with listings covering new geographies and strategies, and more investors adopt the funds due to their versatility and low fees. Sovereign bonds, emerging-markets equities and multi-factor equity were among categories that drew record amounts of money in 2018, BlackRock said, while European e
— ETF Assets Grow to Record High Despite Market Drop | Blog posts | STOXX
Structured Product
▰▰▰▰▰ 414
Quote
“Never invest in anything you cannot understand.”
— Warren Buffett
A structured product is a pre-packaged investment that combines a bond component with a derivative overlay linked to an underlying index (or basket of indices). Structured products are tailored to specific risk-return profiles — capital protection, yield enhancement, or leveraged participation — and are typically issued by banks. STOXX indices are among the most commonly used underlyings for structured products in Europe.
Note
A structured product is a custom-built financial instrument — usually a bond plus an option glued together. The bank might guarantee you will not lose more than 10 % of your capital, while giving you 80 % of the EURO STOXX 50’s upside. The exact terms depend on the product’s design.
Related Terms
Source excerpts (5)
G NR Decrement 4.5% from STOXX Ltd., Qontigo’s index provider, an index that complies with the European Union Climate Benchmarks regulation, to issue structured products. The new index is a decrement version of the iSTOXX® Global Climate Change ESG Index, itself based on the STOXX® Global 1800 Paris-Aligned Benchmark
— Germany’s LBBW licenses STOXX global Paris-aligned decrement index for struct…
The game now is to beat inflation. The threshold of capital preservation is very high.” “If we can highlight the benefits of structured products vis-à-vis active funds trying to deliver alpha, or passive funds only trying to deliver beta, then I think structured products have got a much great
— Taking a closer look at structured products in an increasingly complex world …
Managing Director and Head of European Sales at STOXX, as well as moderator in the debate, asked how deeply embedded ESG strategies had become within structured products. Ingerfurth at J.P. Morgan said Europe remains the most advanced region in this sense, with the Nordic markets still leading, while countries such a
— ESG – Leaving a Mark on Structured Products | Blog posts | STOXX
We think there are not too many alternatives on US stocks to have an ESG index that is close to the benchmark and that allows us to efficiently do structured products.” Finally, how do you work together with an index provider like Qontigo to design a passive strategy such as this one? “We work with many banks, whi
— Q&A with SILEX: Ocean Care indices as targeted sustainability strategy fo…
The iSTOXX Europe ESG Climate Awareness Select 50 Index utilizes both innovative approaches – ESG and smart beta – to generate efficient pricing for structured products and offer a portfolio with strong positive performance drivers. Featured indices - iSTOXX® Europe ESG Climate Awareness Select 50 Index - STOXX® Eur
— ESG Index Geared to Structured Products | Blog posts | STOXX
Sustainability Bond
▰ 3
A sustainability bond is a fixed-income instrument whose proceeds finance a combination of both environmental (green) and social projects. It merges the scope of green bonds and social bonds under a single issuance. ISS ESG provides verification and second-party opinions for sustainability bonds, assessing alignment with the ICMA Sustainability Bond Guidelines.
Note
A sustainability bond is a hybrid — the money goes to projects that are both green and socially beneficial. For example, funding energy-efficient affordable housing would qualify because it addresses both an environmental and a social objective.
Related Terms
Source excerpts (3)
entify key sustainability-related drivers of the sustainable bonds market and credit performance. Benefit From a Comprehensive Rating Methodology The Sustainability Bond Rating utilizes hundreds of data points to provide an in-depth analysis of the sustainability impact and risks of the financed activity of a bond bas
— Sustainability Bond Rating | ISS
Sustainability Bond Rating – The New Asset Level Assessment Available Now Understand the sustainability and climate impact and risk exposure of global labelled debt.
stment Management (AIM) and ISS-climate, the Carbon Yield Insights Report summarizes the experience of applying the Carbon Yield on over 55 green and sustainability bond issuers over two years, as part of AIM’s impact reporting. The issuers combined have financed over 800 projects across 80 countries. The Carbon Yield
— Carbon Yield Insights Report Summarizes Experience of Applying Carbon Yield O…
Sustainability-Linked Bond
▰ 2
A sustainability-linked bond (SLB) is a fixed-income instrument whose financial characteristics (typically the coupon rate) are tied to the issuer’s achievement of predefined sustainability performance targets (SPTs). Unlike use-of-proceeds bonds (green, social, sustainability), SLBs do not restrict how proceeds are spent — instead, the issuer faces a financial penalty (step-up coupon) if it misses its sustainability KPIs. ISS ESG assesses the ambition and credibility of SPTs in its second-party opinions.
Note
A sustainability-linked bond flips the model. Instead of earmarking money for specific projects, the issuer says: “If we do not cut our carbon emissions by 30 % by 2030, our interest rate goes up.” This creates a direct financial incentive for the issuer to meet its sustainability promises.
Related Terms
Source excerpts (2)
The market has seen a number of new structures in the past year alone – from sustainability-linked bonds dedicated to general corporate purposes to transition bonds. As the market grows and continues to innovate, the question is: how can one ensure tran
— Going Beyond “Use-of-Proceeds” to Reach International Sustainabilit…
ading role in developing regulation in this space, other markets around the world are catching up.
- Social Bonds are not just project-related – many Sustainability-Linked Bonds incorporate social factors in their KPIs, although the market is managing the emerging risk of ‘social washing’. - ISS ESG’s Second Party Opinion (S
— The S Factor: Social Impact Considerations in the ESG Fixed-Income Market | ISS
Swap
▰▰▰▰ 141
Quote
“Everything in life is a trade-off.”
— Thomas Sowell
A swap is a broad category of OTC derivative contracts in which two counterparties agree to exchange cash flows or returns according to a predefined formula over a set period. Common types include interest rate swaps, total return swaps, and credit default swaps. Swaps are fundamental to synthetic index replication, risk management, and credit hedging strategies involving STOXX indices.
Note
A swap is a private agreement to trade one stream of payments for another. The simplest example: one party pays a fixed interest rate and receives a floating rate in return. Swaps are the plumbing behind much of modern finance — they enable banks, funds, and corporations to reshape their risk exposures without buying or selling the underlying assets.
Related Terms
Source excerpts (5)
ion of the popular OTC swaps market.” _________________________________________________ Overview 1 – Design of ETRFs TRFs follow the OTC total return swap structure, quoted as an annualized spread in basis points that represents the premium added to an overnight funding benchmark rate to determine the f
— Q&A with Eurex: Switching OTC swaps to a capital-efficient alternative un…
Plaintiffs Scott + Scott, Hausfeld Eligibility There are no security ID’s for this settlement; “FX Instruments” means FX spot transactions, forwards, swaps, futures, options, and any other FX instrument or FX transaction the trading or settlement value of which is related in any way to FX rates. How to
— Navigating the $2.3 Billion Foreign Exchange Benchmark Rate Antitrust Settlem…
A TRF provides a collateral-efficient, fully fungible and liquid alternative to a bespoke equity swap used in equity financing. In contrast to a swap, TRFs are governed by exchange rules, bringing a whole set of costs, risk and operational benefits. B
— STOXX Europe 600 index underlies new Total Return Futures on Eurex | Blog pos…
LOC The month-to-date total return percentage of the bond in local currency terms. Excess Rtn % MTD The month-to-date excess return of the bond Asset Swap Asset swap of the bond PrevMend AssetSwp Previous month-end asset swap of the bond Bond Equiv YTM Yield To Maturity Semi Yld To Worst Yield to worst
— Guide To Eurogov Bond Indices (PDF), p. 17
10 year points from zero-coupon sovereign yield curves Figure 5. G4 Corporate Bond Spreads AA Sub-IG 5. Average spreads over swap curve, weighted by outstanding amount issued. Rating groups (AA, Sub-IG) are blended composites derived from available rating sources page 3 [PAGE 4
T
Total Return Swap
▰ 5
A total return swap (TRS) is an OTC derivative contract in which one counterparty pays the total return of a reference index (price appreciation plus dividends) and the other pays a funding rate (e.g., EURIBOR plus a spread). TRS are widely used for synthetic portfolio replication, allowing investors to gain index exposure without purchasing the underlying securities.
Note
A total return swap is a private deal between two parties. One side says, “I will pay you whatever the EURO STOXX 50 returns,” and the other side says, “I will pay you a floating interest rate.” No shares change hands — it is purely a cash-flow exchange. This is how many synthetic ETFs get their index exposure.
Related Terms
Source excerpts (3)
Basket TRFs at Eurex | Improved Capital Efficiency. For additional information on Index TRFs, please visit Index Total Return Futures | Eurex Listed Total Return Swaps.
— Eurex, STOXX expand Equity and Basket Total Return Futures collaboration with…
Select Dividend 30 indices. | Key benefits of listed TRFs Reduce balance sheet costs TRFs aim to cost-effectively replicate the payoff profile of OTC Total Return Swaps, creating a positive effect on capital requirements. Equity financing Use TRFs to hedge the implied equity repo rate.
— STOXX Europe 600 index underlies new Total Return Futures on Eurex | Blog pos…
uturized version of the popular OTC swaps market.” _________________________________________________ Overview 1 – Design of ETRFs TRFs follow the OTC total return swap structure, quoted as an annualized spread in basis points that represents the premium added to an overnight funding benchmark rate to determine the f
— Q&A with Eurex: Switching OTC swaps to a capital-efficient alternative un…
Transition Bond
▰ 1
A transition bond is a fixed-income instrument designed to fund an issuer’s transition from a carbon-intensive business model to a lower-carbon one. Unlike green bonds, transition bonds acknowledge that the issuer operates in a “brown” sector (e.g., steel, cement, aviation) and needs capital to decarbonize. ISS ESG evaluates transition bond frameworks for credibility and alignment with climate science.
Note
A transition bond is for companies that cannot credibly issue a green bond because their current operations are heavily polluting — but they have a real plan to change. The bond finances that shift. ISS ESG checks whether the transition plan is genuine or just greenwashing.
Related Terms
Source excerpts (1)
The market has seen a number of new structures in the past year alone – from sustainability-linked bonds dedicated to general corporate purposes to transition bonds. As the market grows and continues to innovate, the question is: how can one ensure transparency and trust and what lessons can be drawn from the Gr
— Going Beyond “Use-of-Proceeds” to Reach International Sustainabilit…
Warrant
▰▰▰▰▰▰ 1,875
Quote
“An option is the right, but not the obligation, to make a choice.”
— Anonymous
A warrant is a securitized option — typically issued by a bank — that gives the holder the right to receive a cash settlement based on the performance of an underlying index relative to a strike price. Index warrants are listed on exchanges and are popular with retail investors in Europe, particularly on the EURO STOXX 50 and DAX indices.
Note
A warrant is essentially a long-dated option packaged as a tradeable security. You can buy a call warrant if you think the index will rise or a put warrant if you think it will fall. Warrants are issued by banks (not the exchange clearinghouse), so you carry the issuer’s credit risk.
Related Terms
Source excerpts (5)
Subscribers to ensure they have the appropriate licence in place with the London Stock Exchange to receive this data. 4. Disclaimer and Exclusion of Warranties Nothing in these Conditions of Use shall restrict our right to modify or discontinue the Website, modify or discontinue any information or other c
— STOXX Conditions of Use | STOXX
What factors does your organization consider most important when determining whether an independent chair shareholder proposal warrants support?‐‐‐‐ We believe a separate , independent Chair is a best governance practice that is relevant for all companies even those with a strong Lea
— Walden Asset Management (PDF), p. 1
Furthermore, an increasing amount of investors are tilting their core portfolio to include minimum variance allocation, which is warranted as it provides optimal portfolio management in a systematic way. Looking at a practical example of this implementation, we can construct a portfoli
— Stoxx Minvar Paper (PDF), p. 22
During proxy season, issuers should expect that only truly exceptional situations will warrant engagement prior to, or following, publication of ISS’ proxy analysis. CONTACT INFORMATION FORM Please complete this form to provide contact informat
— ISS Draft Review Process for Canadian Issuers | ISS
ELINES Private Placements/Warrants/Convertible Debentures Climate Policy Recommendation: Vote case-by-case on proposals regarding private placements, warrants, and convertible debentures taking into consideration: ▪ Dilution to existing shareholders’ position: The amount and timing of shareholder ownership
Quick Reference — Instrument Categories
| Category | Instruments |
|---|---|
| Exchange-Traded Products | ETF, ETN, ETC, ETP, Inverse ETF, Leveraged ETF |
| Exchange-Traded Derivatives | Index Futures, Index Options, Call Option, Put Option, Eurex Futures, Warrants |
| OTC Derivatives | Total Return Swap, Interest Rate Swap, Credit Default Swap, Swap |
| Structured / Issued Products | Certificate, Index-Linked Note, Structured Product, Collateralized Debt Obligation |
| Fixed Income — Government | Sovereign Bond, Treasury Bill / Treasury Bond, Municipal Bond |
| Fixed Income — Corporate | Bond, Corporate Bond, Investment Grade Bond, High-Yield Bond, Convertible Bond, Commercial Paper |
| Passive Vehicles | Index Fund, ETF, Portfolio Replication, Money Market Fund |
| Labeled Debt / ESG Fixed Income | Green Bond, Social Bond, Sustainability Bond, Sustainability-Linked Bond, Transition Bond, GSSS Bond, Labeled Debt |
| Real Estate | REIT |
| Equity | Equity |
| Strategies | Covered Call Strategy |
| Concepts | Benchmark, Delta-One Product, Index License, Passive Investment |
Related Glossary Files
- index-families — Index family definitions and constituents
- index-construction — Methodology, weighting, and rebalancing terms
- corporate-governance — Governance, proxy, and stewardship terms