Adjustment Index

DEFINITION of 'Adjustment Index'

A modification made to a piece of numerical data, or a set of numerical data, by a product of some type of a mathematical formula. There are a number of different types of adjustment indices, ranging in scale and purpose from mortgage rate adjustment to handicapping a golfer's score.

BREAKING DOWN 'Adjustment Index'

In consumer finance, an adjustment index is commonly used to adopt adjustable rate mortgages to changes in the economy by combining a number of market interest rates to form a benchmark.

An adjustment index is also used in life insurance policy mathematics to account for the increased risk of the insured living one more year.