Dow Jones Commodity Index - S&P Dow Jones Indices

[Pages:27]Dow Jones Commodity Index

Methodology

December 2021

S&P Dow Jones Indices: Index Methodology

Table of Contents

Introduction

3

Index Objective and Highlights

3

Supporting Documents

3

Index Constituents and Weightings

4

Index Eligibility

4

Weighting Scheme

4

Dow Jones Commodity Index Values

7

Dow Jones Commodity Sector Indices

7

Index Calculation

8

Calculation of the Total Dollar Weight (TDW) of the Dow Jones Commodity Index

on Non-Roll Days

8

Calculation of the Normalizing Constant

8

Contract Daily Return

8

Forward Indices

10

Currency of Calculation and Additional Index Return Series

10

Index Governance

12

Index Committee

12

Index Policy

13

Holiday Schedule

13

Contact Information

13

Index Dissemination

14

Tickers

14

Index Data

14

Web Site

14

Appendix A

15

Contracts Included

15

Appendix B

16

Dow Jones Commodity Index Dynamic Roll

16

Appendix C

18

Dow Jones Commodity Index Single Commodity Capped Component

18

Appendix D

20

Dow Jones Commodity Index Forward Spread

20

Handling of Market Disruption Events

20

S&P Dow Jones Indices: Dow Jones Commodity Index Methodology

1

Appendix E

22

Dow Jones Commodity Index Enhanced

22

Appendix F

24

Methodology Changes

24

Disclaimer

25

S&P Dow Jones Indices: Dow Jones Commodity Index Methodology

2

Introduction

Index Objective and Highlights

The Dow Jones Commodity Index is a broad-market commodity index comprised of liquid commodities f rom three major sectors: Energy, Agriculture and Livestock, and Metals.

The sectors are equally weighted within the index and rebalance monthly. Individual commodities within each sector are weighted by relative liquidity as measured by the five-year average total dollar value

traded (TDVT) annually. As part of the weighting scheme, the largest component is capped at 32% and any additional components are capped at 17% on a monthly basis.

For inf ormation on the roll and contract schedule, please refer to Appendix A.

Supporting Documents

This methodology is meant to be read in conjunction with supporting documents providing greater detail with respect to the policies, procedures and calculations described herein. References throughout the methodology direct the reader to the relevant supporting document for further information on a specific topic. The list of the main supplemental documents for this methodology and the hyperlinks to those documents is as follows:

Supporting Document S&P Dow Jones Indices' Commodities Indices Policies & Practices Methodology S&P Dow Jones Indices' Index Mathematics Methodology

URL Commodities Indices Policies & Practices

Index Mathematics Methodology

This methodology was created by S&P Dow Jones Indices to achieve the aforementioned objective of

measuring the underlying interest of each index governed by this methodology document. Any changes to or deviations from this methodology are made in the sole judgment and discretion of S&P Dow Jones Indices so that the index continues to achieve its objective.

S&P Dow Jones Indices: Dow Jones Commodity Index Methodology

3

Index Constituents and Weightings

Index Eligibility

Liquidity. Each individual commodity must have a TDVT of at least $15 billion ($5 billion for current index commodities) to be eligible for index inclusion.

Country of Listing. Commodities must be traded on exchanges in developed countries. The "developed country" designation is based on the S&P Developed BMI. Country classification changes, if any, become ef f ective during the index's first rebalancing in January following the effective date in the S&P Developed BMI.

For information on the S&P Developed BMI, please refer to the S&P Global BMI, S&P/IFCI Methodology available at available at .

Minimum Weight. The minimum percentage weight requirement for a commodity to be eligible for index inclusion is 0.25% (0.1% for current index commodities).

Weighting Scheme

The weighting scheme consists of three steps: 1. Weighting the individual commodities by liquidity 2. Capping the components 3. Equal weighting the sectors

Step 1 - Liquidity Weighting

The individual commodities in the Dow Jones Commodity Index are liquidity weighted. The liquidity measure used is the Total Dollar Value Traded (TDVT). A five-year simple moving average of the TDVTs is used to determine the effective TDVT for each of the commodities in the index. The TDVT, f or the annual period from September through August, is the sum of the monthly volume of the eligible contracts multiplied by the average contract price for the month multiplied by the size of the contract. The individual TDVTs f or each commodity are then compared to obtain the initial weights of each commodity. The initial weights of the commodities within the same component group are then added up to obtain the initial component weight for that component.

Step 2 ? Component Capping

There are 19 components, with five containing more than one commodity based on their similarity. The multiple commodity components are as follows:

? Petroleum: WTI Crude Oil, Brent Crude Oil, RBOB Gasoline, Gasoil and Heating Oil ? Wheat: Chicago Wheat and Kansas Wheat ? Soybean: Soybeans, Soybean Oil, Soybean Meal ? Cattle: Feeder Cattle and Live Cattle ? Copper: LME Copper, North American Copper

S&P Dow Jones Indices: Dow Jones Commodity Index Methodology

4

The f ollowing table lists the components:

Commodity Contract Code CL HO LCO RB LGO NG W KW C S BO SM KC SB CC CT LC FC LH MAL

MCU HG MPB MNI MZN SI GC PL

Commodity Name WTI Crude Oil Heating Oil Brent Crude Oil RBOB Gasoline Gasoil Natural Gas Chicago Wheat Kansas Wheat Corn Soybeans Soybean Oil Soybean Meal Cof fee Sugar Cocoa Cotton Live Cattle Feeder Cattle Lean Hogs Aluminum LME Copper NA Copper Lead Nickel Zinc Silver Gold Platinum

Component Petroleum Petroleum Petroleum Petroleum Petroleum Natural Gas

Wheat Wheat Corn Soybeans Soybeans Soybeans Cof fee Sugar Cocoa Cotton Cattle Cattle Lean Hogs Aluminum Copper Copper Lead Nickel Zinc Silver Gold Platinum

The capping procedure follows two rules, in succession:

1. No single component's weight can exceed 32%. If any component's weight exceeds 32%, it is capped at 32% and any excess weight is distributed proportionately among the remaining components.

Adjusted weights are calculated at each rebalancing as follows:

If InitialComponentWeightj > 32%, then TargetWeightj = 32%

The individual adjusted weights of commodity i within the component j are obtained as follows:

AdjustedWeighti = TargetWeightj * InitialWeighti InitialComponentWeightj

For all remaining components:

AdjustedComponentWeightj =

68% * InitialComponentWeightj

(100% - DJCICappedWeightc)

where:

DJCICappedWeightc = Total weight of all capped components in the index as of the rebalancing reference date.

InitialComponentWeightj = The sum of the initial weights of all the commodities within the same component j in the index as of rebalancing reference date.

S&P Dow Jones Indices: Dow Jones Commodity Index Methodology

5

2. No remaining component's weight can exceed 17%. Following the implementation of step 1 above, if any remaining component's weight exceeds 17%, it is capped at 17% and the excess weight is distributed proportionately among the remaining uncapped components. This process is repeated iteratively until all the capping rules are met.

For any subsequent components:

If InitialComponentWeightj > 17% then TargetWeightj = 17%

The individual adjusted weights of commodity i within the component j are obtained as follows:

AdjustedWeighti = TargetWeightj * InitialWeighti InitialComponentWeightj

For all remaining components:

AdjustedComponentWeightj =

(100% -TotalCappedWeight ) * InitialComponentWeightj

(100% - DJCICappedWeightc)

where:

TotalCappedWeight = the index weight of all capped components as of the rebalancing ref erence date.

Step 3 - Sector Equal Weighting

Af ter the components are capped, the three sectors (Energy, Agriculture and Livestock, and All Metals) are equal-weighted. For each sector, the individual adjusted weights of the commodities in that sector are summed up. This sum is the adjusted sector weight for that sector.

The f inal weight of each commodity j in sector i is defined to be as follows:

FinalWeight(j) of Sector (i) = 100 * AdjustedWeightj / 3 * AdjustedSectorWeight of Sectori

Contract Weight Factor (CWF) Formula. At the annual rebalancing, the individual CWFs are calculated as f ollows:

CWFi = FinalWeighti / (Pricei / DJCIPrice)

where:

CWFi

= The CWF f or commodity i in the index as of the rebalancing reference date.

Pricei

= The price f or commodity i in the index as of the rebalancing reference date.

DJCIPrice = The sum of all individual prices of commodities in the index as of rebalancing ref erence date.

FinalWeighti = The weight of commodity i, in the index as of the rebalancing reference date.

Capping Frequency: Monthly

Rebalancing Frequency: The weights are reset to the annual weights on a monthly basis.

Rebalancing Date: The Dow Jones Commodity Index business day before the first monthly roll date.

S&P Dow Jones Indices: Dow Jones Commodity Index Methodology

6

Dow Jones Commodity Index Values

On any given day, the value of the index is equal to the total dollar weight of the index divided by a normalizing constant, which assures the continuity of the index over time by enabling comparisons to be

made between the values of the index at various times. The total dollar weight of the index is the total dollar weight of the underlying commodities. The dollar weight of the underlying commodities on any given day is equal to the product of the daily contract reference price, the appropriate contract weight f actor (CWF) and, the appropriate "roll weights" needed during the roll period.

Dow Jones Commodity Sector Indices

Four component sector capped indices and nine sub-sector uncapped indices are also part of the index f amily.

Capped Component Agriculture & Livestock Energy & Metals Agriculture All Metals

Energy Livestock

Grains Sof ts Petroleum

Uncapped All Cattle All Wheat Precious Metals Industrial Metals

Membership of the Nine Sub-Sector Uncapped Indices: 1. Energy: WTI Crude Oil, No 2 Heating Oil, Brent Crude Oil, Gasoil, Unleaded Reg Gas RBOB, Natural Gas 2. Livestock: Feeder Cattle, Live Cattle, Lean Hogs 3. Grains: Corn, Kansas Wheat, Soybeans, Chicago Wheat 4. Softs: Cocoa, Cotton #2, Coffee, Sugar #11 5. Petroleum: WTI Crude Oil, No 2 Heating Oil, Brent Crude Oil, Gasoil, Unleaded Reg Gas RBOB 6. All Cattle: Feeder Cattle, Live Cattle 7. All Wheat: Kansas Wheat, Chicago Wheat 8. Precious Metals: Gold, Platinum, Silver 9. Industrial Metals: Copper High Grade, High Grade Primary Aluminum, Copper - Grade A, Primary Nickel, Standard Lead, Special High Grade Zinc

S&P Dow Jones Indices: Dow Jones Commodity Index Methodology

7

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download