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Title: Optimal Yield Commodity Indices in Context of the Open Interest Term Structure
Authors: Liu, Diana
Advisors: Carmona, Rene
Department: Operations Research and Financial Engineering
Class Year: 2014
Abstract: Optimal yield commodity indices were introduced in 2006. Unlike traditional commodity indices, these indices attempt to maximize roll yield, mitigating the effect of negative roll yields generated by contango forward curves. Around the time of the introduction of these optimally yielding indices, it has been postulated that the open interest term structure of certain commodities had begun to move outwards. On the back of these two potentially related events, this paper seeks to explore the possibility of impact of a particular one of these optimally yielding indices, the Deutsche Bank DBIQ Optimum Yield Diversified Commodity Index on the shape of the open interest curve. The paper seeks to answer two fundamental questions: (1) Has movement of open interest curves been observed? (2) If so, can movement of open interest curves be adequately attributed to the proliferation of these indices? What impact does this have, if it is the case that these indices generate futures trading volume in traditionally illiquid maturities, upon the commodity system as a whole in the context of the ”financialization” of that system?
Extent: 113
Type of Material: Princeton University Senior Theses
Language: en_US
Appears in Collections:Operations Research and Financial Engineering, 2000-2017

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