Knowledge Wire: Computation of Commodity Indices during Rollover Days

Constituents of commodity indices are futures contracts which expire, leading to these constituent contracts being rolled over from one expiry to another on roll-over days for continuity of the index. The rollover days of the MCX iCOMDEX Bullion Index and MCX iCOMDEX Base Metal Index, for instance, are two business days just before the first day of staggered delivery tender period of their respective constituent futures contracts.

The contracts are rolled over during the rollover days in a gradual manner. As the rollover period for MCX iCOMDEX Bullion and Base Metal Indices is two days, on the rollover days these indices are computed in a manner so that the index value reflects fifty percent and hundred percent weightage of the price returns of the constituents in the next expiry on the first and second day respectively of the rollover.

This is explained below in the computation of the MCX iCOMDEX Gold Index values, which has a two-day rollover period.

Where RW is the Roll Weight.

The index computation of the MCX iCOMDEX Gold Index during rollover (26 -27 March 2020) is illustrated below:


Trading Day Front Month (Gold 3-Apr expiry) Next Month (Gold 5-Jun expiry) Gold Index
Price Price Change (%) Roll Weight (RW) Price Price Change (%) Roll Weight (RW)
24-Mar-20 41,379 100% 42,105 0% 14,198.50
25-Mar-20 42,217 2.03% 100% 42,836 1.74% 0% 14,486.04
26-Mar-20 43,542 3.14% 50% 43,643 1.88% 50% 14,849.16
27-Mar-20 43,571 0.07% 0% 43,545 -0.22% 100% 14,815.82
30-Mar-20 43,842 0.62% 0% 43,381 -0.38% 100% 14,760.02


The index values during the rollover days are computed as below:

[Note: For this illustration, all values have been rounded to two decimal places or to whole numbers for the sake of explanation. The actual values of the indices may vary.]

What are the parameters to assess the performance of a commodity index? How have commodity indices performed in the past? Watch out this space next week …

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