Basis risk is the dispersion in economic returns associated with changes in the relationship between spot prices and futures prices.
Bloomberg Commodity Index (BCOM)
The Bloomberg Commodity Index (BCOM), formerly the Dow Jones-UBS Commodity Index, is a long-only index composed of futures contracts on 22 physical commodities.
collateral yield
Collateral yield, is the interest earned from the riskless bonds or other money market assets used to collateralize the futures contract.
commodity-linked note
A commodity-linked note (CLN) is an intermediate-term debt instrument whose value at maturity is a function of the value of an underlying commodity or basket of commodities.
convergence at settlement
Convergence at settlement is the process of the futures price nearing the spot price as settlement approaches, and the two prices matching each other at settlement.
excess return of a futures contract
The return generated exclusively from changes in futures prices is known as the excess return of a futures contract.
fully collateralized position
A fully colleteralized position is a position in which the cash necessary to settle the contract has been posted in the form of short-term, riskless bonds.
heterogeneous
A heterogeneous value differs across one or more dimensions.
inflation
Inflation is the decline in the value of money relative to the value of a general bundle of goods and services.
inflation risk
Inflation risk is the dispersion in economic outcomes caused by uncertainty regarding the value of a currency.
investable index
An investable index has returns that an investor can match in practice by maintaining the same positions that constitute the index.
nominal price
A nominal price refers to the stated price of an asset measured using the contemporaneous values of a currency.
production-weighted index
A production-weighted index weights each underlying commodity using estimates of the quantity of each commodity produced.
real price
A real price refers to the price of an asset that is adjusted for inflation through being expressed in the value of currency from a different time period.
Reuters/Jefferies Commodity Research Bureau (CRB) Index
The Reuters/Jefferies Commodity Research Bureau (CRB) Index is the oldest major commodity index and is currently made up of 19 commodities traded on various exchanges.
roll return
Roll yield or roll return is properly defined as the portion of the return of a futures position from the change in the contract's basis through time.
roll yield
Roll yield or roll return is properly defined as the portion of the return of a futures position from the change in the contract's basis through time.
spot return
Spot return is the return on the underlying asset in the spot market.
Standard & Poor's Goldman Sachs Commodity Index (S&P GSCI)
The Standard & Poor's Goldman Sachs Commodity Index (S&P GSCI) is a long only index of physical commodity futures.