FpML 5-5 transparency View - COMMODITY DERIVATIVE PRODUCT ARCHITECTURE

15 COMMODITY DERIVATIVE PRODUCT ARCHITECTURE

NOTE: Some refactoring work for SettlementPeriods are being considered for the next draft.

15.1 Introduction

This section provides a detailed description of the product architecture for commodity derivatives. FpML transparency view currently provides support for cash-settled commodity swaps (fix/float), cash settled commodity options, bullion forwards, and physically settled natural gas, oil, electricity, and coal swaps.

15.2 Commodity Underlyer

The 'commodity' underlyer identifies the market price on which the OTC contract is written. The structure of the 'commodity' underyer follows the ISDA Commodity Reference Price Framework. FpML defines a number of global elements in the FpML schema for various types of assets The 'commodity' underlyer follows the same model.

The 'instrumentId' and the 'description' elements are derived from the IdentifiedAsset type, which is used by multiple underlyers. The 'instrumentId' contains the unique identifier for the asset, and is intended to hold a Commodity Reference Price in the format set out by ISDA in the 1993 or 2005 Commodity Definitions. However, a CUSIP, ISIN, or any other identifier could also be used. The 'description' contains the name of the asset.

The following sequence of elements is optional and they are specified only in the event that no ISDA Commodity Reference Price or other standard identifier for a commodity 'index' exists.

	commodityBase-A coding scheme value to identify the base type of the commodity being traded. Where possible, this should follow the naming convention used in the 2005 ISDA Commodity Definitions. For example, 'Oil'.

commodityBase-A coding scheme value to identify the base type of the commodity being traded. Where possible, this should follow the naming convention used in the 2005 ISDA Commodity Definitions. For example, 'Oil'.

specifiedPrice-The 'specified Price' describes the nature of the underlying price that is observed. It must be be stated in the underlyer definition as it is not defined in the Commodity Reference Price. Example values of 'specifiedPrice' are 'Settlement' (for a futures contract) and 'WeightedAverage' (for some published prices and indices).

deliveryDates-The 'deliveryDates' element is applicable for a Commodity Reference Price that references a listed future contract (e.g. The Delivery Date is a NearbyMonth).

15.3 commoditySwap

CommoditySwap-The commodity swap product model is designed to support fixed-float swaps, float-float swaps, fixed vs. physical swaps, float vs. physical swaps as well as, weather specific swaps. Its design is fully compatible with other FpML products and the product reuses standard common types.

As with all products in FpML, commodity swaps are accessed through a global element, 'commoditySwap', which substitutes for the 'product' element used in trade structures. The following diagram outlines the product structure.

The 'commoditySwap' structure defines parameters for product-related information (e.g. dates, rates, underlying commodity, price source, etc.). Other trade-related information (e.g. trade date, identifiers, legal documentation, etc.) is held in the containing 'trade' structure.

The 'commoditySwapLeg' element is placeholder within commoditySwap structure for the actual commoditySwap swap legs (e.g. 'fixedLeg' and 'floatingLeg'). The 'weatherLeg' is modeled as a choice to 'commoditySwapLeg' because weather index transactions are strictly financially-settled transaction and always structured with two legs, each of which is a 'weatherLeg'.

The 'fixedLeg', 'floatingLeg', 'weatherLeg' elements contain the details of any scheduled cash payments or exchanges during the life of the instrument and are described later. A transparency view commodity swap contains two legs, one fixed and one floating, or two weather legs. More complex instruments are considered customized and are not fully covered in transparency view; for these, the "nonStandardTerms" indicator should be set to "true".

Physical settlement of swaps is represented using 'coalPhysicalLeg', 'electricityPhysicalLeg', 'gasPhysicalLeg', 'oilPhysicalLeg', 'environmentalPhysicalLeg' paired with 'fixedLeg' or 'floatingLeg' - see details in the Physical Leg section.

15.3.2 fixedLeg

FixedPriceLeg-Fixed Price Leg of a Commodity Swap. It defines schedule of fixed payments associated with a commodity swap.

CommodityCalculationPeriods.model-The different options for specifying the Calculation Periods.
CommodityFixedPrice.model-The different options for specifying the Fixed Price.
CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the contract may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity step specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods.
CommodityFreightFlatRate.model-The Flat Rate, applicable to Wet Voyager Charter Freight Swaps.

The 'fixedPrice' structure defines the price for a given unit of the underlying commodity where that price is fixed for the life of the trade.
The 'totalPrice' structure specifies the total amount of all fixed payments due during the term of the trade.
The total notional quantity and quanity units also must be supplied.

15.3.3 floatingLeg

FloatingPriceLeg-Floating Price Leg of a Commodity Swap. Each 'floatingLeg' defines a series of financial payments for a commodity the value of which is derived from a floating price such as an exchange or an index publication.

	CommodityCalculationPeriods.model-The different options for specifying the Calculation Periods. commodity-Specifies the underlying instrument. Only underlyers of type Commodity are supported.Specifies the underlying instrument. Only underlyers of type Commodity are supported. CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the contract may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity step specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods. calculation-Defines details relevant to the calculation of the floating price.Defines details relevant to the calculation of the floating price.

CommodityCalculationPeriods.model-The different options for specifying the Calculation Periods.
commodity-Specifies the underlying instrument. Only underlyers of type Commodity are supported.Specifies the underlying instrument. Only underlyers of type Commodity are supported.
CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the contract may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity step specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods.
calculation-Defines details relevant to the calculation of the floating price.Defines details relevant to the calculation of the floating price.

Two structures distinguish the 'floatingLeg' from the 'fixedLeg': the existence of the 'commodity' underlyer (see description above at the Commodity Underlyer section) and the 'calculation' structure within the floating leg.

15.3.3.2 calculation

The 'calculation' structure captures details relevant to the calculation of the floating price.

FloatingLegCalculation-A type to capture details relevant to the calculation of the floating price.

The structure is defined by the following elements:

pricingDates- represent the dates on which prices are observed for the underlyer.
averagingMethod-The parties may specify a Method of Averaging where more than one pricing Dates is being specified as being applicable.
In some trades, there may be a spread-The spread over or under the Commodity Reference Price for this leg of the trade.
spreadPercentage-The spread percentage over or under the Commodity Reference Price for this leg of the trade.

15.3.3.2.1 pricingDates

CommodityPricingDates-The dates on which prices are observed for the underlyer.

PricingDays.model-The different options for specifying which days are pricing days within a pricing period. Unless a lag element is present, the pricing period will be contained within the calculation period.
calendarSource-No Annotation Available

15.3.4 weatherLeg

WeatherLeg-A weather leg of a Commodity Swap defines Weather Index Swap transactions. Weather Index Swap transactions are OTC derivative transactions which settle financially based on an index calculated from observations of temperature, precipitation and other weather-related measurements at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Swap transactions result in a cash flow to one of the two counterparties each Calculation Period depending on the relationship between the Settlement Level and the Weather Index Level. A Weather Index swap transaction always consists of a commodity swap element as a parent to two weatherLeg elements.
Weather Index transaction = weatherLeg/weatherLeg.

weatherIndexLevel-Defining the Weather Index Level or Weather Index Strike Level.Defining the Weather Index Level or Weather Index Strike Level.
WeatherCalculationPeriod.model-Descriptions of a calculation period.
weatherNotionalAmount-Defines the price per weather index unit.Defines the price per weather index unit.
calculation-Defines details relevant to the calculation of the aggregate weather index amount.Defines details relevant to the calculation of the aggregate weather index amount.
weatherIndexData-Specifies where the data (e.g. CPD) have been collected, an actual physical reference point (weather station) and various fall back arrangements.Specifies where the data (e.g. CPD) have been collected, an actual physical reference point (weather station) and various fall back arrangements.

15.3.4.1 weatherLeg - WeatherIndex

WeatherIndex-A type defining the Weather Index Level or Weather Index Strike Level.

quantity-This is the Reference Level. The CDD, HDD or HDD Reference Level is specified as the number of (amount of) Weather Index Units specified by the parties in the related Confirmation.
unit-Weather Index Unit derived from one of the following variable methods of determination: Cooling Degree Day (CDD), Heating Degree Day (HDD), Critical Precipitation Day (CPD) as defined in Section 11.15 of the 2005 ISDA Commodity Definitions and User Guide.

15.3.4.2 weatherLeg - WeatherCalculationPeriod

WeatherCalculationPeriods-The schedule of Calculation Period First Days and Lasts Days. If there is only one First Day - Last Day pair then the First is equal to the Effective Date and the Last Day is equal to the Termination Date.
or

15.3.4.3 weatherLeg - weatherNotionalAmount

weatherNotionalAmount-Defines the price per weather index unit.Defines the price per weather index unit.

15.3.4.4 weatherLeg - calculation

WeatherLegCalculation-A type to capture details of the calculation of the Payment Amount on a Weather Index Transaction.

settlementLevel-The Settlement Level means either the cumulative number of Weather Index Units for each day in the Calculation Period (Cumulative) or the cumulative number of Weather Index Units for each day in the Calculation Period divided by the number of days in the Calculation Period (Average) or the maximum number of Weather Index Units for any day in the Calculation Period (Maximum) or the minimum number of Weather Index Units for any day in the Calculation Period.
referenceLevelEqualsZero-If Reference Level Equals Zero is specified to be applicable then CPD means, for any day during the Calculation Period, (A) 1 if the Daily Precipitation for that day is greater than or equal to the CPD Reference Level or (B) zero if the the Daily Precipitation for that day is less than the CPD Reference Level. If Reference Level Equals Zero is specified not to be applicable then CPD means, for any day during the Calculation Period, (A) 1 if the Daily Precipitation for that day is greater than the CPD Reference Level or 0 if the Daily Precipitation for that day is less than or equal to the CPD Reference Level.
calculationDate-The number of days following the final day of the Calculation Period specified in the Confirmation on which is is practicable to provide the notice that the Calculation Agent is required to give for that Settlement Date or Payment Date.
maximumPaymentAmount-The maximum total payment amount that will be paid in any particular transaction.
maximumTransactionPaymentAmount-The maximum payment amount that will be paid in any particular Calculation Period.

15.3.4.5 weatherLeg - weatherIndexData

WeatherIndexData-No Annotation Available

	referenceLevel-Reference level is the number of degree-days (in the case of HDD and CDD) or inches/millimeters (in the case of CPD) on which the differential is calculated. In the case of HDD it is the number of degree-days below this reference level. In the case of CDD it is the number of degree days above this reference level. In the case of CPD it is number of inches/millimeters above this reference level.

referenceLevel-Reference level is the number of degree-days (in the case of HDD and CDD) or inches/millimeters (in the case of CPD) on which the differential is calculated. In the case of HDD it is the number of degree-days below this reference level. In the case of CDD it is the number of degree days above this reference level. In the case of CPD it is number of inches/millimeters above this reference level.

15.3.5 Physical Leg

15.3.5.1 Coverage

The support for physically-settled commodity swap trades includes,

Natural Gas
Oil
Electricity
Coal
Environmental

15.3.5.2 Product Representation

The product representation of physically-settled commodity swap or commodity forward contracts not written on a metal underlying is done within the commoditySwap product element by adding a family of physical legs.

Fixed price transaction = xxxPhysicalLeg + fixedLeg
Floating price transaction = xxxPhysicalLeg + floatingLeg

Note: xxx gets replaced by 'oil', 'gas', 'electricity', 'coal' or 'environmental'.

The following structures vary between all these commodities,

Delivery periods
Product
Delivery
Quantities

15.3.5.2.1 Gas Physical Leg

gasPhysicalLeg

gas-The specification of the gas to be delivered.The specification of the gas to be delivered.
deliveryConditions-The physical delivery conditions for the transaction.The physical delivery conditions for the transaction.
deliveryQuantity-The different options for specifying the quantity. For Fixed trades where the quantity is known at the time of confirmation, a single quantity or a quantity per Delivery Period may be specified. For Variable trades minimum and maximum trades may be specified.The different options for specifying the quantity. For Fixed trades where the quantity is known at the time of confirmation, a single quantity or a quantity per Delivery Period may be specified. For Variable trades minimum and maximum trades may be specified.

15.3.5.2.1.1 gasPhysicalLeg - product

type-The type of gas to be delivered.
calorificValue-No Annotation Available
quality-No Annotation Available

15.3.5.2.1.2 gasPhysicalLeg - deliveryConditions

CommodityDeliveryPoints.model-A Delivery Point, applicable to physically settled commodity transactions.
deliveryType-Indicates whether the buyer and seller are contractually obliged to consume and supply the specified quantities of the commodity.
interconnectionPoint-Identification of the border(s) or border point(s) of a transportation contract.
buyerHub-The hub code of the gas buyer.
sellerHub-The hub code of the has seller.

15.3.5.2.1.3 gasPhysicalLeg - deliveryQuantity

CommodityFixedPhysicalQuantity.model-The different options for specifying a fixed physical quantity of commodity to be delivered.
minPhysicalQuantity-No Annotation Available
maxPhysicalQuantity-No Annotation Available
electingParty-No Annotation Available

15.3.5.2.2 Oil Physical Leg

Physically settled oil or refined products leg.

15.3.5.2.2.1 oilPhysicalLeg - product

15.3.5.2.2.2 oilPhysicalLeg - deliveryConditions

15.3.5.2.2.3 oilPhysicalLeg - deliveryQuantity

15.3.5.2.3 Electricity Physical Leg

Physically settled electricity leg.

15.3.5.2.3.1 electricityPhysicalLeg - product

15.3.5.2.3.2 electricityPhysicalLeg - deliveryConditions

15.3.5.2.3.3 electricityPhysicalLeg - deliveryQuantity

15.3.5.2.4 Coal Physical Leg

Physically settled coal leg.

15.3.5.2.4.1 coalPhysicalLeg - product

15.3.5.2.4.2 coalPhysicalLeg - deliveryConditions

15.3.5.2.4.3 coalPhysicalLeg - deliveryQuantity

15.3.5.2.5 Environmental Physical Leg

EnvironmentalPhysicalLeg-No Annotation Available

numberOfAllowances-The number of allowances, certificates or credit to be transaction in the transaction.The number of allowances, certificates or credit to be transaction in the transaction.
environmental-The specification of the type of allowance or credit.The specification of the type of allowance or credit.
abandonmentOfScheme-Applies to U.S. Emissions Allowance Transactions. Specifies terms which apply in the event of an Abandonment of Scheme event.Applies to U.S. Emissions Allowance Transactions. Specifies terms which apply in the event of an Abandonment of Scheme event.

15.3.5.2.5.1 environmentalPhysicalLeg - numberOfAllowances

UnitQuantity-A quantity and associated unit.

quantityUnit-Quantity Unit is the unit of measure applicable for the quantity on the Transaction.
quantity-Amount of commodity per quantity frequency.

15.3.5.2.5.2 environmentalPhysicalLeg - product

EnvironmentalProduct-A type defining the characteristics of the environmental allowance or credit being traded. Settlement of environmental transactions is classified as physical because settlement is accomplished through the exchange of one or more certificates (despite the fact that this exchange is almost always executed through electronic book entry transfer between the parties allowance accounts).

productType-Specifies the type of environmental allowance or credit. Examples include allowances or credit issued by the European Union (E.U.) or by the State of California in the Unites States.
vintage-Applies to U.S. Emissions Allowance Transactions. The year(s) of the applicable Emissions Product(s) as specified in an Emissions Transaction.
applicableLaw-Applies to U.S. Emissions Allowance Transactions. Used to specify the Applicable Emissions Law when this is not defined in Emissions Product Definitions Exhibit.
trackingSystem-Applies to U.S. Emissions Allowance Transactions. Used to specify the Tracking System when this is not defined in Emissions Product Definitions Exhibit.

15.3.5.2.5.3 environmentalPhysicalLeg - abandonmentOfScheme

abandonmentOfScheme-Applies to U.S. Emissions Allowance Transactions. Specifies terms which apply in the event of an Abandonment of Scheme event.Applies to U.S. Emissions Allowance Transactions. Specifies terms which apply in the event of an Abandonment of Scheme event.

15.4 commodityOption

commodityOption-Defines a commodity option product. The product support for financially-settled exercises or exercise into physical forward contracts written on precious and non-precious metals. options in FpML is based on the creation of a 'commodityOption' product. The product references the 'commodity' underlyer in order to support the underlying asset of the option.
The product support for financially-settled or physically-settled forward (for preciouse and non-preciouse metal) options in FpML is based on the creation of a 'commodityOption' product. The product references the 'commodity' underlyer in order to support the underlying asset of the option.

All FpML products inherit two optional elements from the Product type: 'productType' and 'productId'. The 'productType' defines a classification of the type of product. FpML defines a simple product categorization using a coding scheme. The 'productId' contains a product reference identifier allocated by a party. In this case, FpML does not define the domain values associated with this element.

CommodityOption-Defines a commodity option product type. The product support for financially-settled exercises or exercise into physical forward contracts written on precious and non-precious metals. options in FpML is based on the creation of a 'commodityOption' product. The product references the 'commodity' underlyer in order to support the underlying asset of the option.
CommodityFinancialOption.model-Items specific to financially-settled commodity options.
CommodityPhysicalOption.model-Items specific to financially-settled commodity options.
For specifying physically-settled forward (preciouse and non-preciouse metal forward) options. NOTE: support for other physically-settled options within commodityOption was DEPRICATED. The commoditySwaption product, should be used instead.
CommodityWeatherOption.model-Described Weather Index Option component. Weather Index Option transactions are OTC derivative transactions which settle financially based on an index calculated from observations of temperature and precipitation at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Option Transactions results in a cash flow to the buyer depending on the relationship between the Settlement Level to the Weather Index Strike Level.
premium-The option premium payable by the buyer to the seller.The option premium payable by the buyer to the seller.

The choice between 'CommodityFinancialOption.model', 'CommodityPhysicalOption.model' and 'CommodityWeatherOption.model' models allows to select the financially-settled commodity options, or physically-settled forward (precious and non-precious metal) options, or weather specific option and described below.

15.4.1 commodityOption - CommodityFinancialOption

CommodityFinancialOption.model-Items specific to financially-settled commodity options.

commodity-Specifies the underlying instrument. Usual content is an ISDA Commodity Reference Price Name. The 'commodity' underlyer component is specified using a reference to the 'commodity' asset (see description above at the Commodity Underlyer section).
The 'commodity' underlyer component is specified using a reference to the 'commodity' asset (see description above at the Commodity Underlyer section).
CommodityOptionFeatures.model-Describes additional features within the option.
exercise-The parameters for defining how the commodity option can be exercised and how it is settled.
CommodityStrikePrice.model-The different options for specifying the Strike price per unit.
Note that the intention is that a strike price per unit step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the strike price schedule to the calculation periods as clearly as possible. The strike price per unit of the strike price per unit steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period).
CommodityFloatingStrikePrice.model-The different options for specifying the average strike price per unit. These options are to specify a single average strike price per unit or to specify a schedule of average strike prices.

15.4.1.1 commodityOption - CommodityFinancialOption - CommodityOptionFeatures

CommodityOptionFeatures.model-Describes additional features within the option.

effectiveDate-The effective date of the Commodity Option Transaction. Note that the Termination/Expiration Date should be specified in expirationDate within the CommodityAmericanExercise type or the CommodityEuropeanExercise type, as applicable.
terminationDate-Specifies the termination date of the Commodity Option Transaction. In some confirmations this will be indicated as the second date in "Option Term" or "Term". Note: If provided, terminationDate should not be before specified expirationDate within the CommodityAmericanExercise type or the CommodityEuropeanExercise type.
CommodityAsian.model-Model group containing features specific to asian/averaging commodity options.

15.4.1.1.1 commodityOption - CommodityFinancialOption - CommodityOptionFeatures - CommodityAsian

CommodityAsian.model-Model group containing features specific to asian/averaging commodity options.

The following elements are specific to asian/averaging commodity options only:

The Calculation Periods are represented explicitly with the 'calculationPeriods' element or as a parametric representation with the 'calculationPeriodsSchedule' structure.
The 'pricingDates' element defines the dates on which the option will price.
The 'averagingMethod' is present if there is more than one 'pricingDates' element.

15.4.1.2 commodityOption - CommodityFinancialOption - CommodityNotionalQuantity

As with the 'commoditySwap', the notional amount of the 'commodityOption' is specified stating either the 'notionalQuantity' or if the notional changes over the life of the transaction, then the 'notionalQuantitySchedule' is specified. In addition, the 'totalNotionalQuantity' must be specified. Note that the intention is that a notional step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the notional quantity schedule to the calculation periods as clearly as possible. The notional steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period).

CommodityNotionalQuantity.model-The different options for specifying the Notional Quantity. A flat notional for the term of the contract may be specified, or else the Notional Quantity per Calculation Period. In the latter case, there must be a notional quantity step specified for each Calculation Period, regardless of whether the Notional Quantity changes or remains the same between periods.

15.4.1.3 commodityOption - CommodityFinancialOption - CommodityExercise

CommodityExercise-The parameters for defining how the commodity option can be exercised, how it is priced and how it is settled.

americanExercise-The parameters for defining the expiration date for an American option.
europeanExercise-The parameters for defining the expiration date and time for a European or Asian style option. For an Asian style option the expiration date is equivalent to the termination date.
settlementCurrency-The currency into which the Commodity Option Transaction will settle. If this is not the same as the currency in which the Commodity Reference Price is quoted, then an FX determination method should also be specified.

15.4.1.3.1 CommodityAmericanExercise

CommodityAmericanExercise-A type for defining exercise procedures associated with an American style exercise of a commodity option.

exercisePeriod-Describes the American exercise periods.
exerciseFrequency-The exercise frequency for the strip.

15.4.1.3.2 CommodityEuropeanExercise

CommodityEuropeanExercise-A type for defining exercise procedures associated with a European style exercise of a commodity option.

expirationDate-The last day within an exercise period for an American style option. For a European style option it is the only day within the exercise period. For an averaging option this is equivalent to the Termination Date.
exerciseFrequency-The exercise frequency for the strip.

15.4.2 commodityOption - CommodityWeatherOption

CommodityWeatherOption.model-Described Weather Index Option component. Weather Index Option transactions are OTC derivative transactions which settle financially based on an index calculated from observations of temperature and precipitation at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Option Transactions results in a cash flow to the buyer depending on the relationship between the Settlement Level to the Weather Index Strike Level.

effectiveDate-Effective date of an option.
WeatherCalculationPeriod.model-Descriptions of a calculation period.
weatherNotionalAmount-No Annotation Available
exercise-No Annotation Available
weatherIndexStrikeLevel-Weather Index strike price level is specified in terms of weather index units (e.g. 1 Days, 3 Inches, etc.)
calculation-Contains parameters which figure in the calculation of payments on a Weather Index Option.
weatherIndexData-Specifies where the data (e.g. CPD) have been collected, an actual physical reference point (weather station) and various fall back arrangements.

effectiveDate is an effectiveDate of a Weather Index Option.

15.4.2.1 commodityOption - CommodityWeatherOption - WeatherCalculationPeriod

WeatherCalculationPeriod.model-Descriptions of a calculation period.

Weather Index Swap and Weather Index Option transactions are OTC derivative transactions which settle financially based on a index calculated from observations of temperature and precipitation at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Swap transactions result in a cash flow to one of the two counterparties each Calculation Period depending on the relationship between the Settlement Level and the Weather Index Level. Weather Index Option Transactions results in a cash flow to to the buyer if depending on the relationship between the Settlement Level to the Weather Index Strike Level.

weatherCalculationPeriods-No Annotation Available

15.4.2.1.1 WeatherCalculationPeriods

WeatherCalculationPeriods-The schedule of Calculation Period First Days and Lasts Days. If there is only one First Day - Last Day pair then the First is equal to the Effective Date and the Last Day is equal to the Termination Date.

calculationPeriodFirstDay-No Annotation Available
calculationPeriodEndDay-No Annotation Available

15.4.2.2 commodityOption - CommodityWeatherOption - weatherNotionalAmount

weatherNotionalAmount-No Annotation Available

15.4.2.3 commodityOption - CommodityWeatherOption - exercise

exercise-No Annotation Available

Note: americanExercise-The parameters for defining the expiration date for an American option.
- is not to be used with Weather Options
europeanExercise-The parameters for defining the expiration date and time for a European or Asian style option. For an Asian style option the expiration date is equivalent to the termination date.
settlementCurrency-The currency into which the Commodity Option Transaction will settle. If this is not the same as the currency in which the Commodity Reference Price is quoted, then an FX determination method should also be specified.

15.4.2.3.1 paymentDates

paymentDates-Dates on which payments will be made.

15.4.2.4 commodityOption - CommodityWeatherOption - weatherIndexStrikeLevel

weatherIndexStrikeLevel-Weather Index strike price level is specified in terms of weather index units (e.g. 1 Days, 3 Inches, etc.)

quantity-This is the Reference Level. The CDD, HDD or HDD Reference Level is specified as the number of (amount of) Weather Index Units specified by the parties in the related Confirmation.
unit-Weather Index Unit derived from one of the following variable methods of determination: Cooling Degree Day (CDD), Heating Degree Day (HDD), Critical Precipitation Day (CPD) as defined in Section 11.15 of the 2005 ISDA Commodity Definitions and User Guide.

15.4.2.5 commodityOption - CommodityWeatherOption - calculation

calculation-Contains parameters which figure in the calculation of payments on a Weather Index Option.

settlementLevel-The Settlement Level means either the cumulative number of Weather Index Units for each day in the Calculation Period (Cumulative) or the cumulative number of Weather Index Units for each day in the Calculation Period divided by the number of days in the Calculation Period (Average) or the maximum number of Weather Index Units for any day in the Calculation Period (Maximum) or the minimum number of Weather Index Units for any day in the Calculation Period.
referenceLevelEqualsZero-If Reference Level Equals Zero is specified to be applicable then CPD means, for any day during the Calculation Period, (A) 1 if the Daily Precipitation for that day is greater than or equal to the CPD Reference Level or (B) zero if the the Daily Precipitation for that day is less than the CPD Reference Level. If Reference Level Equals Zero is specified not to be applicable then CPD means, for any day during the Calculation Period, (A) 1 if the Daily Precipitation for that day is greater than the CPD Reference Level or 0 if the Daily Precipitation for that day is less than or equal to the CPD Reference Level.
calculationDate-The number of days following the final day of the Calculation Period specified in the Confirmation on which is is practicable to provide the notice that the Calculation Agent is required to give for that Settlement Date or Payment Date.
maximumPaymentAmount-The maximum total payment amount that will be paid in any particular transaction.
maximumTransactionPaymentAmount-The maximum payment amount that will be paid in any particular Calculation Period.

15.4.2.6 commodityOption - CommodityWeatherOption - weatherIndexData

weatherIndexData-Specifies where the data (e.g. CPD) have been collected, an actual physical reference point (weather station) and various fall back arrangements.

	referenceLevel-Reference level is the number of degree-days (in the case of HDD and CDD) or inches/millimeters (in the case of CPD) on which the differential is calculated. In the case of HDD it is the number of degree-days below this reference level. In the case of CDD it is the number of degree days above this reference level. In the case of CPD it is number of inches/millimeters above this reference level.

referenceLevel-Reference level is the number of degree-days (in the case of HDD and CDD) or inches/millimeters (in the case of CPD) on which the differential is calculated. In the case of HDD it is the number of degree-days below this reference level. In the case of CDD it is the number of degree days above this reference level. In the case of CPD it is number of inches/millimeters above this reference level.

15.4.3 commodityOption - CommodityPhysicalOption

CommodityPhysicalOption.model-Items specific to financially-settled commodity options.

The approach is similar to that used for interest rate swaptions by embedding a physically-settled precious and non-precious metal forward transaction within the option transaction. So that the exercise of an option results in a new physically-settled forward transaction.

commodityForward-Defines a commodity forward product.
physicalExercise-The parameters for defining how the commodity option can be exercised into a physical transaction.

The 'commodityForward' component is described in the 'Commodity Forward' section below.

The 'physicalExercise' component is the same as for physically-settled commodity options described in the 'commoditySwaption' section below.

NOTE: support for other physically-settled options within 'commodityOption' is DEPRICATED. The 'commoditySwaption' product should be used instead.

15.5 commoditySwaption

The commoditySwaption is specific to physically-settled commodity options:

CommoditySwaption-Commodity Swaption.
optionType-The type of option transaction.The type of option transaction.
e.g. a call option or a put option.
commoditySwap-The underlying commodity swap definiton.The underlying commodity swap definiton.
physicalExercise-The parameters for defining how the commodity option can be exercised into a physical transaction.The parameters for defining how the commodity option can be exercised into a physical transaction.
premium-The option premium payable by the buyer to the seller.The option premium payable by the buyer to the seller.

15.5.1 commoditySwaption - CommoditySwapDetails

The approach is similar to that used for interest rate swaptions by embedding a physically-settled swap transaction within the option transaction. So that the exercise of an option results in a new physically-settled swap transaction.

effectiveDate-Specifies the effective date of this leg of the swap. When defined in relation to a date specified somewhere else in the document (through the relativeDate component), this element will typically point to the effective date of the other leg of the swap.
terminationDate-Specifies the termination date of this leg of the swap. When defined in relation to a date specified somewhere else in the document (through the relativeDate component), this element will typically point to the termination date of the other leg of the swap.
commoditySwapLeg-Defines the substitutable commodity swap leg
weatherLeg-A weather leg element of a Commodity Swap defines Weather Index Swap transactions. Weather Index Swap transactions are OTC derivative transactions which settle financially based on an index calculated from observations of temperature, precipitation and other weather-related measurements at weather stations throughout the world. Sub-Annex C of the 2005 ISDA Commodity Definitions provides definitions and terms for a number of types of weather indices. These indices include: HDD (heating degree days), CDD (cooling degree days), CPD (critical precipitation days). Weather Index Swap transactions result in a cash flow to one of the two counterparties each Calculation Period depending on the relationship between the Settlement Level and the Weather Index Level. A Weather Index swap transaction always consists of a commodity swap element as a parent to two weatherLeg elements.

15.5.2 commoditySwaption - physicalExercise

physicalExercise-The parameters for defining how the commodity option can be exercised into a physical transaction.The parameters for defining how the commodity option can be exercised into a physical transaction.

CommodityPhysicalExercise-The parameters for defining how the physically-settled commodity option can be exercised and how it is settled.
americanExercise-The parameters for defining the expiration date(s) and time(s) for an American style option.
europeanExercise-The parameters for defining the expiration date(s) and time(s) for a European style option.

15.5.3 commoditySwaption - premium

premium-The option premium payable by the buyer to the seller.The option premium payable by the buyer to the seller.
Should the premium differ over the course of an Asian options life (e.g. because delivery is per calendar day which is reflected in the premium), a premium schedule should be specified. Note that the intention is that a premium step should be specified for each Calculation Period in the trade, regardless of whether there is a change in value between two periods. This is so as to match the premium schedule to the calculation periods as clearly as possible. The premium steps must be in chronological order (i.e the first step corresponds to the first Calculation Period, the last step to the last Calculation Period).

CommodityPremium-The commodity option premium payable by the buyer to the seller.
paymentAmount-Non negative payment amount.Non negative payment amount.
premiumPerUnit - Not used in Swaptions

15.6 commodityForward

The commodityForward product element supports the representation of Precious and Non-Precious metal Forwards. Whilst some commodity forwards are booked as single period swaps, precious forwards are extremely basic trades and are confirmed under a different ISDA confirmation template

Even though the initial scope is limited to Precious and Non-Precious Forward, the intention of the working group is to allow support for other commodity classes should this be required.

valueDate-Specifies the value date of the Commodity Forward Transaction. This is the day on which both the cash and the physical commodity settle.Specifies the value date of the Commodity Forward Transaction. This is the day on which both the cash and the physical commodity settle.
fixedLeg-The fixed leg of a Commodity Forward Transaction.
averagePriceLeg-Specifies the calculated floating price leg of a Commodity Forward Transaction.
commodityForwardLeg-Defines the substitutable commodity forward leg.

15.6.1 commodityForward - fixedLeg

The fixed payment of the Commodity Forward product is represented using the fixedLeg element of type NonPeriodicFixedPriceLeg.

fixedPrice-Fixed price on which fixed payments are based.Fixed price on which fixed payments are based.
totalPrice-The total amount of the fixed payment for all units of the underlying commodity.The total amount of the fixed payment for all units of the underlying commodity.

15.6.2 commodityForward - averagePriceLeg

averagePriceLeg-Specifies the calculated floating price leg of a Commodity Forward Transaction.

AveragePriceLeg-The average price leg of an average price commodity bullion or non-precious metal forward transaction.
commodity-Identifies the underlying asset when it is a listed commodity.
pricingStartDate-Defines the Start of the Pricing period. PricingStartDate is optional when discrete pricingDates are supplied and is not recommended to be included. Should they coexist, pricingStartDate is expected to be the same as the earliest pricing date or earlier for a Term deal as the discrete dates will take precedence.Defines the Start of the Pricing period. PricingStartDate is optional when discrete pricingDates are supplied and is not recommended to be included. Should they coexist, pricingStartDate is expected to be the same as the earliest pricing date or earlier for a Term deal as the discrete dates will take precedence.
calculation-Captures details relevant to the calculation of the floating price.Captures details relevant to the calculation of the floating price.

The 'commodityForwardLeg' element is placeholder within commodityForward structure for the actual Precious and Non-Precious metal legs (e.g. bullionPhysicalLeg and metalPhysicalLeg).

15.6.3 commodityForward - bullionPhysicalLeg

The intention of the new leg is to re-use as many existing commodity components as possible to achieve a flexible implementation of a forward that will be adaptable for use with further commodity classes.

Consequently, the BullionPhysicalLeg component will be a member of a choice group such that further commodity types can be added over time.

BullionPhysicalLeg-Physically settled leg of a physically settled Bullion Transaction.

15.6.4 commodityForward - metalPhysicalLeg

metalPhysicalLeg-Physically settled metal products leg.

MetalPhysicalLeg-Physically settled leg of a physically settled Metal transaction.
metal-The specification of the Metal Product to be delivered.The specification of the Metal Product to be delivered.
deliveryConditions-The physical delivery arrangements and requirements for a physically settled non-precious metal transaction.The physical delivery arrangements and requirements for a physically settled non-precious metal transaction.
CommodityFixedPhysicalQuantity.model-The different options for specifying a fixed physical quantity of commodity to be delivered.

15.6.4.1 commodityForward - metalPhysicalLeg - metal

metal-The specification of the Metal Product to be delivered.The specification of the Metal Product to be delivered.

material-The types of metal product for a physically settled metal trade.
grade-The grade(s) of material which can be delivered in seller's option.

15.6.4.2 commodityForward - metalPhysicalLeg - deliveryConditions

deliveryConditions-The physical delivery arrangements and requirements for a physically settled non-precious metal transaction.The physical delivery arrangements and requirements for a physically settled non-precious metal transaction.

MetalDelivery-The physical delivery conditions for the transaction.
deliveryLocation-The Delivery Point for a physically settled non-precious metal transaction.
risk-"Risk of loss" may also be used, equivalently, on confirmation documents.

15.6.4.3 commodityForward - metalPhysicalLeg - CommodityFixedPhysicalQuantity.model

CommodityFixedPhysicalQuantity.model-The different options for specifying a fixed physical quantity of commodity to be delivered.

totalPhysicalQuantity-The Total Quantity of the commodity to be delivered.

Previous	Top of Section	Next