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Definition: KBW Bank Index
KBW Bank Index was created in Philadelphia and is traded in Philadelphia Stock Exchange. It is named after a recognized authority in the banking industry i.e., Keefe , Bruyette and Woods (KBW). KBW is a full investment bank and institutionally oriented securities broker and dealer specializing in the financial service sector. It is an economic index which serves as a benchmark for the banking sector and consists of 24 banking companies stocks. The KBW Index is traded under ticker symbol BKX. It began its trading options in September 1992 and this index represents a tenth of the value of the Keefe, Bruyette and Woods Index (KBWI). It is weighted according to capitalization and is represented by the major banks and money centers across Philadelphia.
The KBW Index tracks the stock of 24 major banking companies such as Bank of America and Citigroup. It is a modified cap-weighted index and serves as a benchmark for the banking, insurance and financial sectors. The Index is evaluated annually by KBW to assure the composition of highly representative banking industry stocks. It captures over $1.2 trillion market capitalization of the US banking Industry.
It is cash settled on the International Securities Exchange and PHLX. The Index Multiplier is 100. The Strike price Intervals are at least $2.50. The contracts expires on Saturday following the third Friday of the Expiration month. The exercise style of the contracts is European. The exercise-settlement value is the difference between the exercise settlement value and exercise price of the option multiplied by $100. Since these contracts are fungible, contract specifications on these exchanges mirror one another. Banking Companies like Citigroup, Bank of America, J.P .Morgan Chase , Wells Fargo &Co. ,State Street Corp, PNC Financial Services, Wachovia and the New York Mellon Group are some of the 24 banking stocks covered in the Index.