Price Index

A commodity price index is a fixed-weight (or weighted average) index of a selected commodity prices which can be based on spot or future prices.
This index is designed to be a representation of the broad commodity asset class or a subset of commodities
An index tracks a basket of commodities to measure their performance.
These indices are often traded on exchanges
These indices allow investors to get access to this market without having to enter the futures market.
Investors can obtain passive exposure to a commodity price index through a total return swap.


The advantages of a long only commodity index exposure include negative correlation with other asset classes such as equities and bonds as well as protection against inflation.


The disadvantage is the negative roll yield due to contango in certain commodities


Commodity Indices

World Bank Index
Continuous Index
Dow Jones UBS Index
Standard & Poors Goldman Sachs Index
Reuters/Jefferies Index
Rogers International Index



There are broadly speaking 3 different types of commodity index
Price Index - measures the price return of commodity future prices is a theoretical index which is not investable
Excess Return Index (ER) - measures the returns accrued from holding and rolling nearby commodity futures: ER return = price return + roll yield return
Total Return Index (TR) - measures the collateralised returns accrued from holding and rolling nearby commodity futures: TR return = price return + roll yield + collateral return (T-bill)







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