Reply To: Modelling CME CQA Quarterly Coal Options

Israr Ahmed

The Q/Y averaging of the Future curves is now fairly standard. In fact all recent implementations of Q/Y/M Futures tend to involve the Q/Y/M Future curves being average off a trader marked curve ( which could be Daily and Monthly granularity). This ensures that the Exposures of the M/Q/Y FUTURES and PHYSICAL all show up on same Trader marked curve. The ability to attach Market Index Curves to the FUTURES also allows you to retain the ability to give Exchange Valuations via a seperate scenario .

(This also applies to Power Futures where the PWR-EXCH-OPT can be booked against a Power Valuation Index )

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