Unit ko samjho · NISM Series XVI
Commodity Indices
12 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
Is unit mein kya hai
- An index is constructed from several specified commodity futures contracts. What does a change in that index principally summarise?
- A hypothetical index has beginning-period weights of 50% in metal, 30% in energy and 20% in an agricultural future. Their period returns are +4%, −2% and +5%. With no rebalancing or other adjustments, what is the index return?
- A commodity index rises from 2,400 to 2,520. What is its percentage increase?
- Why does a continuing commodity-futures index generally need a published roll methodology?
- A cable maker buys only copper. It considers hedging with a base-metal index that also includes other metals. What is the main matching concern?
- Which description matches the broad S&P GSCI in the index provider’s official overview?
- The official MCX BULLDEX overview identifies which underlying commodity-futures combination?
- In the S&P GSCI methodology, what component distinguishes the total-return description from the commodity-futures excess-return description?
- A hypothetical commodity-index future has a multiplier of ₹50 per index point. A trader buys 4 contracts at 3,200 and closes at 3,170. Ignoring costs, what is the cumulative result?
- An index changes constituent quantities while market prices stay fixed. Why might its methodology adjust a divisor or normalising constant at that change?
- A hypothetical index has 10 constituents. One energy contract has 40% weight and falls 5%, while every other constituent is unchanged. What is the index return under the given weighted-return method?
- A futures-based commodity index and a spot-price series track the same commodity name but earn different annual returns. Which explanation should be investigated before concluding that the index is incorrectly calculated?
Zaroori ideas
Practice bank se · 1
An index is constructed from several specified commodity futures contracts. What does a change in that index principally summarise?
An index must be interpreted according to its constituents and construction method. The specified constituents are futures contracts, so movements summarise those selected market exposures. Producer equity values, profits and warehouse quantities are different variables. They may relate economically to commodities but are not the stated constituent prices. Remember: Identify what is in the index before interpreting what its movement means.
Hint Common mistake: Assuming a commodity index is an index of commodity-producing shares.
XVI-031Practice bank se · 2
A hypothetical index has beginning-period weights of 50% in metal, 30% in energy and 20% in an agricultural future. Their period returns are +4%, −2% and +5%. With no rebalancing or other adjustments, what is the index return?
A portfolio-style index return weights each constituent return by its beginning-period share of exposure. Metal contributes 0.50 × 4% = 2 percentage points. Energy contributes 0.30 × (−2%) = −0.6 point. Agriculture contributes 0.20 × 5% = 1 point. Total return = 2 − 0.6 + 1 = 2.4%. The weights add to 100%. Remember: Weight returns, not the number of constituents.
Hint Common mistake: Averaging constituent returns equally when their index weights differ.
XVI-032Practice bank se · 3
A commodity index rises from 2,400 to 2,520. What is its percentage increase?
An index-level change becomes a return only after division by the starting index level. The increase is 120 index points. Percentage return = 120 ÷ 2,400 × 100 = 5%. Dividing by the ending value would answer a different question. Remember: Index points and percent returns use different units.
Hint Common mistake: Using the final index level as the denominator for a simple holding-period gain.
XVI-033Practice bank se · 4
Why does a continuing commodity-futures index generally need a published roll methodology?
An ongoing index has a longer life than each expiring constituent futures contract. A roll method identifies when and how exposure moves from expiring contracts to later designated contracts. The later contract may have a different price, and execution, weighting and return treatment matter. The roll is therefore part of the index methodology rather than a cosmetic name change. Remember: An ongoing futures benchmark requires an explicit way to handle .
Hint Common mistake: Assuming an index can hold the same expiring future forever.
XVI-034Practice bank se · 5
A cable maker buys only copper. It considers hedging with a base-metal index that also includes other metals. What is the main matching concern?
A diversified benchmark can introduce cross-commodity basis risk for a concentrated physical exposure. Copper is only part of the index. Other constituent prices and the weighting method can move the index differently. The maker must examine exposure sensitivity, quantities, timing and contract terms. Diversification within the index does not guarantee an exact hedge of a single input. Remember: A broader index is not automatically a closer hedge for a narrow business exposure.
Hint Common mistake: Confusing index diversification with perfect exposure matching.
XVI-035Practice bank se · 6
Which description matches the broad S&P GSCI in the index provider’s official overview?
A named benchmark should be recognised by both its asset exposure and weighting principle. The provider describes S&P GSCI as a broad commodity-market benchmark using liquid commodity futures and production weighting. This does not imply equal sector weights or constant constituent weights. The current methodology governs eligibility and calculation. Remember: Distinguish a weighting input such as production from the prices whose performance is measured.
Hint Common mistake: Assuming production-weighted means the index is a simple tonnage count.
XVI-036Practice bank se · 7
The official MCX BULLDEX overview identifies which underlying commodity-futures combination?
A sector commodity index provides exposure to its specified futures constituents, not to similarly named companies. The MCX product overview identifies gold and silver futures as the bullion exposure. This question does not require memorising current constituent weights, contract sizes or index-futures specifications, all of which require the applicable product documents. Remember: Bullion futures exposure is different from a portfolio of bullion-company equities.
Hint Common mistake: Reading a sector name without checking the actual underlying instruments.
XVI-105Practice bank se · 8
In the S&P GSCI methodology, what component distinguishes the total-return description from the commodity-futures excess-return description?
Return-series labels can include different cash-flow components even for a common futures exposure. The methodology describes excess return through the commodity futures portfolio’s contract returns. Total return also includes interest on hypothetical committed funds. This does not imply that physical commodities pay dividends or that a total-return series cannot fall. The precise methodology controls the calculation. Remember: Compare like-for-like return series before comparing index performance.
Hint Common mistake: Comparing total return with excess return and attributing the entire difference to commodity prices.
XVI-106Practice bank se · 9
A hypothetical commodity-index future has a multiplier of ₹50 per index point. A trader buys 4 contracts at 3,200 and closes at 3,170. Ignoring costs, what is the cumulative result?
Index-futures profit depends on the change in index points and the contract’s cash multiplier. Point change = 3,170 − 3,200 = −30. Result = −30 × ₹50 × 4 = −₹6,000. The multiplier is a rupee value per point, not a weight in tonnes or kg. Remember: Index points become money through the stated contract multiplier.
Hint Common mistake: Treating an index point as one rupee regardless of the specification.
XVI-107Practice bank se · 10
An index changes constituent quantities while market prices stay fixed. Why might its methodology adjust a divisor or normalising constant at that change?
An index should distinguish market movement from a mechanical change in its construction. Changing quantities can change the unadjusted aggregate even without any market-price movement. A continuity adjustment can preserve a comparable index level across that event. Later market gains and losses still affect the index normally. Remember: A divisor adjustment preserves measurement continuity, not investor wealth by itself.
Hint Common mistake: Treating a methodology adjustment as an economic trading profit.
XVI-108Practice bank se · 11
A hypothetical index has 10 constituents. One energy contract has 40% weight and falls 5%, while every other constituent is unchanged. What is the index return under the given weighted-return method?
The effect of a constituent depends on its weight, not simply on how many names appear in the basket. The moving constituent contributes 0.40 × (−5%) = −2 percentage points. All other contributions are zero. Having 10 constituents does not make their weights equal or remove concentration in the 40% position. Remember: Count weights, not just names, when assessing index concentration.
Hint Common mistake: Equating the number of constituents with effective diversification.
XVI-109Practice bank se · 12
A futures-based commodity index and a spot-price series track the same commodity name but earn different annual returns. Which explanation should be investigated before concluding that the index is incorrectly calculated?
A rolled futures exposure is not identical to a continuous holding represented by a spot-price series. The index may hold specified expiries, roll them at defined times and incorporate a particular return convention. These choices can make its returns differ from a simple spot-price change. This is a reason to reconcile methodologies, not an excuse to ignore genuine tracking or calculation errors. Those require comparison against the correct benchmark rules. Remember: Compare the actual exposure path and return definition, not just the commodity label.
Hint Common mistake: Assuming that a futures-index return must equal the headline spot-price return.
XVI-110Expiry day is the last day on which a derivative contract can be traded.
Aage padhoLot size is the number of units of the underlying that one derivatives contract stands for.
Aage padho