Commodity price index
Encyclopedia
A commodity price index is a fixed-weight index or (weighted) average of selected commodity
prices, which may be based on spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of commodities, such as energy or metals.
The constituents in a commodity price index can be broadly grouped into the following categories:
Investors can choose to obtain a passive exposure to these commodity price indices through a total return swap
. The advantages of a passive commodity index exposure include negative correlation with other asset classes such as equities and bonds, as well as protection against inflation
. The disadvantages include a negative roll yield
due to contango
in certain commodities, although this can be reduced by active management techniques, such as reducing the weights of certain constituents (e.g. precious and base metals) in the index.
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
prices, which may be based on spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of commodities, such as energy or metals.
The constituents in a commodity price index can be broadly grouped into the following categories:
- Energy
- Metals
- Base Metals
- Precious Metals
- Agriculture
- Grains
- Softs
- Livestock
Investors can choose to obtain a passive exposure to these commodity price indices through a total return swap
Total return swap
Total return swap, or TRS , or total rate of return swap, or TRORS, is a financial contract that transfers both the credit risk and market risk of an underlying asset.- Contract definition :...
. The advantages of a passive commodity index exposure include negative correlation with other asset classes such as equities and bonds, as well as protection against inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
. The disadvantages include a negative roll yield
Roll yield
The roll yield is the yield that a futures investor captures when their futures contract converges to the spot price; in a backwardated futures market the price rolls up to the spot price, so the roll yield is positive, whereas when the market is in contango the price rolls down to the spot price,...
due to contango
Contango
Contango is the market condition wherein the price of a forward or futures contract is trading above the expected spot price at contract maturity. The resulting futures or forward curve would typically be upward sloping , since contracts for further dates would typically trade at even higher prices...
in certain commodities, although this can be reduced by active management techniques, such as reducing the weights of certain constituents (e.g. precious and base metals) in the index.
Indices
- World Bank Commodity Price Index
- Continuous Commodity Index (CCI)Continuous Commodity Index (CCI)The Thomson Reuters Equal Weight Continuous Commodity Index is recognized as a major barometer of commodity prices. The index comprises 17 commodity futures that are continuously rebalanced:...
- Astmax Commodity Index(AMCI)
- Commin Commodity Index
- Dow Jones-AIG Commodity IndexDow Jones-AIG Commodity IndexThe Dow Jones-UBS Commodity Index DJ-UBSCI is a broadly diversified index that allows investors to track commodity futures through a single, simple measure....
- Goldman Sachs Commodity IndexGoldman Sachs Commodity IndexThe S&P GSCI serves as a benchmark for investment in the commodity markets and as a measure of commodity performance over time. It is a tradable index that is readily available to market participants of the Chicago Mercantile Exchange. The index was originally developed by Goldman Sachs...
- Thomson Reuters/Jefferies CRB Index
- Rogers International Commodity IndexRogers International Commodity IndexThe Rogers International Commodity Index is a composite, USD based, total return index, designed by Jim Rogers in 1996/1997. The first fund began on July 31, 1998....
- Standard & Poor's Commodity IndexStandard & Poor's Commodity IndexThe Standard & Poor's Commodity Index is a commodity price index that measures the price changes in a cross section of agricultural and industrial commodities with actively traded U.S. futures contracts, stretching across five sectors - Energy, Metals, Grains, Livestock, and Fibers & Softs. Only...
- NCDEX Commodity IndexNCDEX Commodity IndexThe NCDEX Commodity Index is an equal-weighted spot price index of 20 agricultural commodities convering different groups such as oils and oilseeds, fibres, etc.It is the first such index to be launched in India...
- Deutsche Bank Liquid Commodity Index (DBLCI)Deutsche Bank Liquid Commodity IndexThe Deutsche Bank Liquid Commodity Index was launched in February 2003.It tracks the performance of six commodities in the energy, precious metals, industrialmetals and grain sectors. The DBLCI has constant weightings...
- Credit Suisse Commodity Benchmark Index (CSCB)
- UBS Bloomberg Constant Maturity Commodity Index (CMCI)
- Merrill Lynch Commodity index eXtra (MLCX)
Articles
- Commodity Indexes Overview and Analysis by Rogers Raw Materials
- Research Database of Commodity Price Indices