Markit iBoxxFX TWI Index Guide_20120907 - Markit.com

Markit iBoxxFX TWI 

Index Guide 

September 2012

Markit iBoxxFX TWI Index 


Table of Contents 

1 iBoxxFX Trade Weighted Indices ....................................................................................................................... 4 

1.1 Index Inputs .................................................................................................................................................... 4 

1.2 Publication ...................................................................................................................................................... 4 

1.3 History ............................................................................................................................................................. 4 

1.4 Launch ............................................................................................................................................................ 4 

2 Index Calculation and Rebalancing ................................................................................................................... 5 

2.1 Daily Index Calculation ................................................................................................................................... 5 

2.2 Real-time Index Calculation ............................................................................................................................ 5 

2.2.1 Applicable Rates ......................................................................................................................................... 5 

2.2.2 Calculation Frequency ................................................................................................................................ 5 

2.2.3 Holiday Schedule ........................................................................................................................................ 5 

2.3 Rebalancing .................................................................................................................................................... 6 

3 Calculation ............................................................................................................................................................ 7 

3.1 Index Returns .................................................................................................................................................. 7 

3.2 Historical Volatilities ........................................................................................................................................ 7 

4 Reference Exchange Rate Indices and Weights ............................................................................................... 8 

4.1 Index Identifiers ............................................................................................................................................... 9 

5 Further information ............................................................................................................................................ 10 

Copyright © 2012, Markit Group Limited. All rights reserved. www.markit.com 

2



Changes to the iBoxxFX index family 

31 Dec 2011 Publication of new weights and constant factors 


28 Sep 2010 Changes on index inputs calculation frequency 




04 Dec 2006 Launch of the iBoxx FX TWI Indices 


3



1 iBoxxFX Trade Weighted Indices 

The iBoxx FX TWIs are based on major central banks’ basket exchange rates which track the performance of a 

currency against a defined basket of currencies. The following currency indices are calculated: AUD, CAD, CHF, 

EUR, GBP, JPY, NOK, NZD, SEK, USD. 

Each basket is limited to the five currencies with the largest weights in the relevant central bank’s officially published 

index (for JPY excl KRW, TWD and SGD; for AUD excl KRW; for CAD excl MXN). HKD and CNY have already been 

excluded from the baskets because of their currency pegs. The respective weights are scaled up to 100%. 

Daily European and US closes are published on the Markit website and Reuters using the WM/Reuters 4pm and 

9pm spot rates respectively. Real-time indices are available on Reuters calculated on tick-by-tick basis from Monday 

10 am Wellington to Friday 4 pm New York time. 

1.1 Index Inputs 

Spot rates for index fixings: Exchange rates are taken from the European and US fixings as defined by WM/Reuters. 

The European fixing is at 4 p.m. British Time and the US fixing is at 4 p.m. Eastern Time. 

Real-time indices are published on Reuters. Calculation is tick-by-tick from Monday 10am Wellington to Friday 4pm 

NY time. The Reuters live feeds are used for index calculation. 

1.2 Publication 

Daily European and US closes with weights and additional data are published on www.markit.com and Reuters free 

of charge. Real-time indices are also available free of charge via Reuters (see section 4.1 Index Identifiers for 

Reuters RICs). The complete end-of-day fixings and historical volatilities are available via Markit’s FTP service. 

1.3 History 

Daily European and US fixings are available from 31 December 2001. 

1.4 Launch Date 

04 December 2006 


4



2 Index Calculation and Rebalancing 

2.1 Daily Index Calculation 

Spot rates are taken from the European and US fixings (mid rates) as defined by WM/Reuters. The European fixing 

is at 4 p.m. British Time and the US fixing is at 4 p.m. Eastern Time. Index levels are published along with additional 

data on Reuters, the Markit website, and on the Markit FTP server by 4:30pm and 9:30pm British Time respectively. 

2.2 Real-time Index Calculation 

2.2.1 Applicable Rates 

Reuters live feed is used where the cross rates are calculated by capturing each currency against the USD. The 

index is based on mid rates. The Mid rates are calculated as the arithmetic mean of bid and offer rates rounded to 

the 5th decimal place, where .000005 is rounded up. 

2.2.2 Calculation Frequency 

Real-time indices are published on Reuters. Calculation is tick-by-tick from Monday 10am Wellington to Friday 4pm 

NY time. The Reuters live feeds are used for index calculation. 

2.2.3 Holiday Schedule 

Real-time indices will not be calculated on the 25 th of December and the 1 st of January. On such days no intraday 

indices are calculated from 4pm Eastern Time on the day before the holiday until 10am Wellington on the day after 

the holiday (9pm on the day before the holiday until 9pm on the holiday date London time). The real-time indices will 

be calculated on all other holidays listed below. 

European and US daily fixings are only calculated if WM/Reuters publishes the applicable rates. The holiday 

schedule below is published on the website (www.markit.com) and will be updated when new information has been 

made available by WM/Reuters. US daily fixings will not be published on any of the holidays listed below. 

Date WM/Reuters Action (UK Time) EU_EOD 

02-Jan-2012 From 10pm No 

06-Apr-2012 No Service No 

28-May-2012 From 10pm Yes 

24-Dec-2012 Until 6pm Yes 

25-Dec-2012 No Service No 

26-Dec-2012 Until 4pm from 10pm only Yes 



29-Mar-2013 No Service No 

27-May-2013 Until 6pm from 10pm only Yes 



26-Dec-2013 4pm only, from 10pm Yes 







26-Dec-2014 4pm Only Yes 





5



2.3 Rebalancing 

25-May-2015 From 10pm No 




01-Jan-2016 No Service No 

25-Mar-2016 No Service No 


26-Dec-2016 From 10pm No 





26-Dec-2017 4pm only, from 10pm Yes 


Each currency index’s constituent currencies and weights are reviewed annually by Markit for changes in the 

underlying official central bank index, and such changes are announced on the Markit website by December 24th. 

As the index is limited to the five largest currencies, if two currencies have the same trade weights, the currency that 

comes first alphabetically will be chosen. The weights are scaled up to 100% and the number of decimals reduced to 

2. The smallest weight is adjusted so the weights sum up to exactly 100%. 

On the last trading day of the year the new constant factors are determined, so that the value for the new TWI is 

identical to the old TWI at the point of transition. On the rebalancing date, both the European and US fixings are 

calculated using the 9pm spot rates, i.e. they are identical. This is to ensure that only one set of constant factors 

exists with regard to the real time index calculation. 

After the new constant factors have been determined, the information on the Markit website and Reuters is updated 

accordingly. 

The new weights and constant factors become effective at the start of the first trading day of the following year-end 

at 10am Wellington time. 


6



3 Calculation 

The index is calculated using the geometric index method: 

IndexSpot 

i 

t 

= κ × 

i 

s 

m 

j 

∏ ( Spot t ) 

j 

w ( j ) s 

The initial constant factors κ were set so that all indices start at 100 on the inception date. 

The constant factors are updated within the annual rebalancing so that the indices calculated with the new weights 

are linked to the closing index values for the previous year. 

The following analytics are calculated on a daily basis for the European and US close fixings. 

3.1 Index Returns 

Daily, month-to-date (MTD), and year-to-date (YTD) index returns: 

ret 

i 

t , t −1 

i 

IndexSpot t − IndexSpot 

= 


i 

t −1 

For MTD read (t-s) instead of (t-1) and for YTD (t-y) instead of (t-1). 

3.2 Historical Volatilities 

∧ i 

σ 

t , n 

where 

= 

s 

s 

i 2 

t , n 

i 2 

t , n 

⋅ 252 

1 

= 

n 

n 

∑ 

(ln 



i 

t −1 

t = 1 t −1 

t 

1 

− 

n 

n 

∑ 

ln 



t = 1 t −1 

Read n = 10, 21, 63, 126, 252 for 2 week, 1 month, 3 month, 6 month, 12 month volatility 

Whereby the following definitions, abbreviations respectively are used 

∧ i 

σ t , n ...................... n-trading day volatility of index i at time t 

{ EU US } 

i ∈ , .... fixings 

i 

κ s ........................ constant factor set for index i at the last re-balancing s 

w ( j) 

s ................... weight of currency j at the last re-balancing s 

i 

IndexSpot t .......... level of index i at time t 

i 

ret t , t − 1 ................. return of index i from the previous trading day’s close 

i 

ret t t − s 

i 

ret t t − y 

, ................ return of index i from the last trading day of the previous month to date t 

, ................ return of index i from the last trading day of the previous year to date t 

j 

Spot t ................... amount of currency j per unit of index currency at time t 


t 

) 

2 

7



4 Reference Exchange Rate Indices and Weights 

TWI Central Bank Reference Index Basket 

Currency 

Weight (%) 

AUD "Reserve Bank of Australia TWI" 

JPY 

36.41 

- 23 currencies 

EUR 

24.18 

- reweighted annually 

USD 

20.83 

NZD 

9.97 

GBP 

8.61 

constant 30.5407757616189 

CAD "CERI" 

USD 

81.50 


EUR 

9.96 

- replaced the C-6 Index in October 2006 

JPY 

5.64 

GBP 

2.90 

constant 123.234200614329 

CHF "Swiss franc export-weighted exchange rate index" EUR 

75.24 


USD 

12.27 


GBP 

6.19 

JPY 

4.67 

CAD 

1.63 

constant 124.874214383802 

EUR "EER-21" 

USD 

34.44 


GBP 

31.28 

- reweighted every 5 years 

JPY 

14.59 

CHF 

11.25 

SEK 

8.44 

constant 48.9853922973567 

GBP "Sterling ERI" 

EUR 

66.19 


USD 

21.84 

- reweighting intended annually 

JPY 

5.26 

CHF 

4.08 

SEK 

2.63 

constant 45.314212801333 

JPY "BOJ Effective Exchange Rate Index" 

USD 

48.93 


EUR 

36.28 

- reweighted every 5 years 

GBP 

6.44 

CAD 

4.77 

AUD 

3.58 

constant 12944.2633464753 

NOK "Norges Bank TWI" 

EUR 

50.64 


SEK 

20.84 

- no specific reweighting schedule (when OECD DKK 

10.19 

publishes new trade weights) 

USD 

9.29 

GBP 

9.04 

constant 433.901937087939 

NZD "Trade-Weighted Exchange Rate Index" 

USD 

30.23 


EUR 

27.97 

- reweighted annually at the end of December 

AUD 

21.26 

- current weights effective December 2005 

JPY 

14.25 

GBP 

6.29 

constant 104.407848012792 


8



TWI Central Bank Reference Index Basket 

Currency 

Weight 

SEK "Swedish TCW Index" 

EUR 

62.02 


USD 

12.85 

- constant weights since inception, no reweighting GBP 

12.77 

planned 

DKK 

6.19 

NOK 

6.17 

constant 784.224683840943 

USD "Major Currencies Index" 

EUR 

38.32 


CAD 

31.67 


JPY 

17.80 

- current weights effective January 2007 

GBP 

8.90 

CHF 

3.31 

constant 35.3692367346807 

4.1 Index Identifiers 

Reuters RICs 

Name 

EU Fixing US Fixing Real-Time ISIN 

iBoxxFX AUD TWI .IBOXXFXAUDE .IBOXXFXAUDU .IBOXXFXAUD GB00B1CD9Q29 

iBoxxFX CAD TWI .IBOXXFXCADE .IBOXXFXCADU .IBOXXFXCAD GB00B1CD9R36 

iBoxxFX CHF TWI .IBOXXFXCHFE .IBOXXFXCHFU .IBOXXFXCHF GB00B1CD9S43 

iBoxxFX EUR TWI .IBOXXFXEURE .IBOXXFXEURU .IBOXXFXEUR GB00B1CD9T59 

iBoxxFX GBP TWI .IBOXXFXGBPE .IBOXXFXGBPU .IBOXXFXGBP GB00B1CD9V71 

iBoxxFX JPY TWI .IBOXXFXJPYE .IBOXXFXJPYU .IBOXXFXJPY GB00B1CD9W88 

iBoxxFX NOK TWI .IBOXXFXNOKE .IBOXXFXNOKU .IBOXXFXNOK GB00B1CD9X95 

iBoxxFX NZD TWI .IBOXXFXNZDE .IBOXXFXNZDU .IBOXXFXNZD GB00B1CD9Y03 

iBoxxFX SEK TWI .IBOXXFXSEKE .IBOXXFXSEKU .IBOXXFXSEK GB00B1CD9Z10 

iBoxxFX USD TWI .IBOXXFXUSDE .IBOXXFXUSDU .IBOXXFXUSD GB00B1CDB009 


9



5 Further information 

� For contractual or content issues please refer to 

Markit Indices Limited 

Walther-von-Cronberg-Platz 6 

60594 Frankfurt am Main 

Germany 

Tel +49 (0) 69 299 868 100 

Fax +49 (0) 69 299 868 149 

E-mail iBoxx@Markit.com 

internet: www.markit.com/indices 

� For technical issues and client support please contact iBoxx@Markit.com or 

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Japan: +81 3 6402 0127 General: +800 6275 4800 +1 877 762 7548 

Singapore: +65 6499 0079 UK: +44 20 7260 2111 

� Licences and Data 

iBoxx is a registered trademark of Markit Indices Limited. Markit Indices Limited owns all iBoxx data, database 

rights, indices and all intellectual property rights therein. A licence is required from Markit Indices Limited to create 

and/or distribute any product that uses, is based upon or refers to any iBoxx index or iBoxx data. 

� Ownership 

Markit Indices Limited is a wholly-owned subsidiary of Markit Group. www.markit.com 

� Other index products 

Markit Indices Limited owns, manages, compiles and publishes the iTraxx credit derivative indices and the 

iBoxxFX Trade Weighted Indices. 


10

Markit iBoxxFX TWI Index Guide_20120907 - Markit.com

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