A swap in which one leg or both pay off the total return on a blended index. The underlying blended index could be linked to any asset class or to various asset classes such as equity, interest rates, etc. However, the main feature of such a swap is that it involves an index not an arbitrary set of assets. For example, a blended index swap may consist of the following two legs:
[0.4 S&P return + 0.6 Nikkei return] or [0.5 S&P return + 0.5 CAC return]
The following is a depiction of the structure of this swap:
