Guide to the Deutsche Börse EUROGOV Idices Versio.2 November 20
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 2 Geeral Iformatio I order to esure the highest quality of each of its idices, Deutsche Börse AG exercises the greatest care whe compilig ad calculatig fixed icome idices o the basis of the rules set out i this guide. However, Deutsche Börse AG caot guaratee that the various idices, or the various ratios that are required for idex compilatio ad computatio purposes, as set out i this guide, are always calculated free of errors. Deutsche Börse AG accepts o liability for ay direct or idirect losses arisig from ay icorrect calculatio of such idices or key figures. Decisios cocerig the way its fixed icome idices are calculated, as well as regardig their compilatio, are always take by Deutsche Börse AG to the best of its kowledge ad belief. Deutsche Börse AG shall ot be liable for ay losses arisig from such decisios. The fixed icome idices of Deutsche Börse AG do ot represet a recommedatio for ivestmet of whatever ature. I particular, the compilatio ad calculatio of the various idices shall ot be costrued as a recommedatio of Deutsche Börse AG to buy or sell idividual securities, or the basket of securities uderlyig a give idex.
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 3 Cotets EUROGOV Idices Overview 5 2 EUROGOV Idex Rules 6 2. Idex cocept 6 2.2 Calculated Idices 6 2.3 Basis 6 2.4 Review of idex compositio 6 2.5 Idex calculatio 7 2.5. Calculatio times ad frequecy 7 2.5.2 Settlemet Covetio 7 2.5.3 Publicatio 7 3 Idex Formula 8 3. Price Idex 0 3.2 Total Retur Idex 2 4 Idex Aalytics 3 4. Average Yield 3 4.2 Average Duratio 3 4.3 Average Modified Duratio 4 4.4 Average Covexity 4 4.5 Average Coupo 4 4.6 Average Remaiig Years to Maturity 5 4.7 Nomial Value 5 4.8 Market Value 5 4.9 Base Market Value 5 5 Bod Aalytics 7 5. Yield 7 5.2 Duratio 7 5.3 Modified Duratio 8 5.4 Covexity 8 6 Appedix 9 6. Idex Overview 9 6.2 Your direct Lie to Deutsche Börse 20
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 4 Chages to the Rules ad Regulatios: March 2009 Itroductio Deutsche Börse EUROGOV Germay Idices Jauary 20 Itroductio Deutsche Börse EUROGOV Frace Idices Novermber 20 Modificatio of calculatio rules for Deutsche Börse EUROGOV Germay Moey Market Idex i order to cap the average residual life of the Idex to 6 moths
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 5 EUROGOV Idices Overview The EUROGOV idices family reflects the market for fixed icome bods deomiated i Euro. Deutsche Börse is resposible for the calculatio ad distributio of the various idices. The idices are desiged as selectio idices ad measure the ivestmet performace i the market segmet of highly liquid govermet bods i the Eurozoe. I the field of Germa govermet bods the Deutsche Börse EUROGOV Germay Moey Market idex measures the ivestmet success for highly liquid govermet bods of the Federal Republic of Germay i the moey market segmet. The selectio criteria for EUROGOV Germay idices guaratee high liquidity of the uderlyig bods ad easy replicability of the idices.
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 6 2 EUROGOV Idex Rules 2. Idex cocept For the EUROGOV idices (except for Germay EUROGOV Moey Market) bods with a maturity of at least oe year are cosidered. Therewith the medium ad log term segmets of the capital market are covered. EUROGOV Germay Moey Market icludes bods with a remaiig maturity of at least two moths ad a maximum of oe year represetig the moey market segmet. For idex admissio, the miimum outstadig volume of bods is 4b. Zerobods are excluded from the idices. 2.2 Calculated Idices For all coutries, the followig maturity buckets are calculated ad distributed: -3, 3-5, 5-0, ad over 0 years. For Germa govermet bods the maturity rage betwee two moths ad oe year (Moey Market) is calculated additioally. 2.3 Basis The base date of EUROGOV idices is 3 Jauary 999 with a base value of 00. 2.4 Review of idex compositio The compositio of the EUROGOV idices is reviewed quarterly (ed of Jauary, April, July ad October) except for the EUROGOV Germay Moey Market idex which is adjusted mothly. The adjustmet is carried out described as follows.. Selectio of bods All bods that meet the idex criteria at the rebalacig date (ed of moth) represet the uiverse of eligible bods. 2. Adjustmet of idex compositio Each bod will be assiged to the correspodig idices accordig to the classificatio criteria. The eligibility for a selectio idex is determied o the basis of a rakig list. For each idex, all eligible bods are raked accordig to outstadig omial issue size. I case of equal outstadig issue sizes, priority is Each iclusive maturity-miimum level ad exclusive maturity-upper limit.
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 7 give to the ewer bod. The EUROGOV idices cotai the first 5 bods of this rakig list. 3. Adjustmet of the weightig of bods A bod is weighted i the idex o the basis of its market capitalizatio. Chages of the outstadig omial volume i the idex are adjusted durig the review of the idex compositio. 4. Cap Limit Cappig is a procedure which restricts the weightig of idex costituets ad prevets sigle uderlyigs from domiatig the idex. The weight of a bod i the idex will be capped at the rebalacig date to 30 percet. 2.5 Idex calculatio 2.5. Calculatio times ad frequecy The idices are calculated ad distributed every miute betwee 9 a.m. ad 5 p.m. CET. Idex calculatio is based o the Xetra tradig caledar. 2.5.2 Settlemet Covetio 2.5.3 Publicatio All EUROGOV idices are calculated assumig t+0 settlemet. Each day Deutsche Börse AG publishes idex closig idex levels ad aalytics o its web pages. All data o the curret idex compositio will be published o the Iteret i the eveig of the idex adjustmet by Deutsche Börse AG.
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 8 3 Idex Formula The EUROGOV idices are calculated as so called basket idices, implyig that each idex is based o real bods. This makes it easy to track the idex performace 2. The idices are based o a volume weighted summatio cocept that aalyzes relative chages i value compared to a referece date. The compositio ad volume of the idex portfolio are adjusted at this date. Therefore, correspodig adjustmets to idex trackig portfolios are oly required oce, i.e. at the respective referece date. The outstadig issue size of each bod is used for the purpose of idex weightig. Sice the residual life of EUROGOV Germay Moey Market idex is required to ot exceed 6 moths, the idex requires further ehacemet to the geeral rule. The followig weightig mechaism is implemeted to fulfil both the residual life ad weight costraits:. Selectio of the first 5 bods by otioal outstadig a. Check of the 30% cap b. Check that the idex YtM (Years to Maturity) does ot exceed 0.5 If both are fulfilled the idex compositio is ready ( ); if.b. is ot fulfilled step 2. is implemeted, otherwise step 3. is implemeted 2. The selectio i poit. udergoes a bucketig process (2 buckets, for YtM above or below 0.5) a. YtM for left ad right bucket are calculated b. Scalig factors for the two buckets ( ) are calculated i order to cap the average YtM of the idex to 0.5 c. The selectio is rescaled accordig to weights calculated i 2.b. ( ) ad step 3. is implemeted 3. The rescaled selectio udergoes the cappig process a. Each bod (by bucket) is checked ( ) 2 The calculatio methodology applied for EUROGOV idices is i lie with the stadards laid dow by the Europea Federatio of Fiacial Aalysts Societies (EFFAS). For a detailed overview, cf. Patrick J. Brow (2002): Costructig ad Calculatig Bod Idices A Guide to the EFFAS Europea Bod Commissio Stadardized Rules, 2d Editio, Cambridge, Eglad, 2002.
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 9 b. For each bucket, the sum of weights of the bods to be capped ( h ) ad the umber of bods beig capped is calculated ( ) c. Withi each bucket, the excess weight is proportioally redistributed across the bods ot beig capped ( ) through a. This step is iteratively repeated util all bods i the bucket have a weight ot exceedig the 30% cap. Ay residual weight which caot be allocated without breachig the cap, will be ivested i EONIA: this operatio is icluded i step 4. 4. To esure that idex TtM does ot exceed 6 moths (could be a cosequece of poit 3.), fial weights, weight is allocated to EONIA ( ) I formulas: If >0.5 the. are calculated ad residual 0.5 > 0 h h h h + h h
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 0,, h, 0.5 Where:,, idicates the i-th bod i the segmet, idicates the set of bods belogig to the bucket with residual YtM up to ad icludig 6 moths (L) or above 6 moths (R) : 0.5 : >0.5 idicates the market weight of bod b idicates the weightig factor of bucket B 30% cap to idividual bod s weight 3. Price Idex Price idices are calculated as follows: PI t PIt s P P s N N s s whereby: PI t Price idex value at time t PI t-s Price idex value o the last caledar day of the previous moth P Price or quotatio of bod i at time t
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page P -s Closig price or closig quotatio of bod i o the last tradig day of the previous moth N -s Outstadig issue size of bod i o the third last tradig day of the previous moth Number of bods i the idex t-s Time of the last adjustmet t Calculatio date
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 2 3.2 Total Retur Idex For total retur idices, the mothly adjustmet ivolves the reivestmet of coupo paymets i the overall portfolio at the referece date fixed for ay adjustmet of the idex compositio. Cosequetly, total retur idices are calculated as follows: TR t TRt s ( P + A + G ) ( P s + A s ) N N s s whereby (i additio to the deotatios used i 3.): A Accrued iterest of bod i at time t A -s Accrued iterest of bod i o the last caledar day of the previous moth G Value of a coupo paymet o bod i at time t, made at the coupo date or withi the period s. If there has bee o paymet withi the respective moth, the value equals zero TR t Total retur idex value at time t TR t-s Total retur idex value o the last caledar day of the previous moth Deutsche Börse calculates price ad total retur idices o the basis of bidig bid quotes. Newly issued bods eter the idices with the last kow bidig ask quote from the previous moth.
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 3 4 Idex Aalytics There are several aalytics that are calculated i additio to the idex values. The followig aalytics are calculated ad distributed for each idex separately: 4. Average Yield The average yield is calculated, weightig the yield of each bod by the correspodig market capitalizatio ad duratio of the respective bod. RY t Y ( P + A ) ( P + A ) N N s s D D Whereby: RY t Average yield at time t Y Yield of bod i at time t D Duratio of bod i at time t 4.2 Average Duratio The average duratio is calculated, weightig the duratio of each bod by the correspodig market capitalizatio of the respective bod. DU t D ( P + A ) ( P + A ) N N s s Whereby: DU t Average duratio at time t
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 4 4.3 Average Modified Duratio Calculatio of the average modified duratio is i lie with the previously-described calculatio process for the average duratio. MDU Whereby: MD t ( P + A ) ( P + A ) N N s s MDU t Average modified duratio at time t MD Modified duratio of bod i at time t 4.4 Average Covexity Calculatio of the average covexity is i lie with the previously described calculatio process for the average duratio ad average modified duratio. CX t X ( P + A ) ( P + A ) N N s s Whereby: CX t Average covexity at time t X Covexity of bod i at time t 4.5 Average Coupo The average coupo is calculated, weightig the coupo of each bod by its outstadig issue size. CO t C N N s s Whereby: CO t Average coupo at time t C Coupo of bod i at time t
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 5 4.6 Average Remaiig Years to Maturity Calculatio of the average remaiig years to maturity is i lie with the previouslydescribed calculatio process for the average coupo (i.e. weightig o the basis of outstadig issue size). LF t L N N s s Whereby: LF t Average remaiig years to maturity at time t L Remaiig years to maturity of bod i at time t 4.7 Nomial Value The cumulated omial value of all bods at time t is calculated as follows: NV t N s Whereby: NV t Cumulated omial value of all bods at time t 4.8 Market Value The cumulated market value of all bods at time t is calculated as follows: MV t ( P ) + A + XD s CP N s Whereby: MV t Cumulated market value of all bods at time t 4.9 Base Market Value The cumulated base market value (i.e. market value as at the base date) of all bods is calculated as follows:
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 6 MV 0 ( P s + A s + XD s CP s ) N s Whereby: MV 0 Cumulated base market value of all bods
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 7 5 Bod Aalytics There are several bod aalytics that are calculated i additio to the idex values ad idex aalytics. 5. Yield The yield of a bod at time t is calculated as follows: P + A j CF i,j L ( + Y ),j P Price or quotatio of bod i at time t A Accrued iterest of bod i at time t CF i,j Cash flow of bod i withi period j Y Yield of bod i at time t L,j Time (i years) betwee time t ad the cash flow of bod i withi period j Number of future cash flows t Calculatio date The Newto iteratio method is used to solve the equatio for Y. 5.2 Duratio The duratio of a bod at time t is calculated as follows: D j CF j i,j CF L i,j,j ( + Y ) ( + Y ) L L,j,j P + A j CF i,j L,j ( + Y ) L i, t,j whereby (i additio to the deotatios used i 5.): D Duratio of bod i at time t
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 8 5.3 Modified Duratio The modified duratio of a bod at time t is calculated as follows: MD D + Y whereby (i additio to the deotatios used i 5.): MD Modified duratio of bod i at time t 5.4 Covexity The covexity of a bod at time t is calculated as follows: X P + A j L,j ( ) ( ) ( L + 2 + + ),j L CF Y,j i,j whereby (i additio to the deotatios used i 5.): X Covexity of bod i at time t
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 9 6 Appedix 6. Idex Overview Overview of the EUROGOV idices Germay Frace Idex Alpha (TR) 3 ISIN (TR) 3 Alpha ISIN (PR) 3 (PR) 3 Deutsche Börse EUROGOV Germay Moey Market 3LE2 DE000A0S3QB2 3LEV DE000A0S3P50 Deutsche Börse EUROGOV Germay -0 3LE DE000A0S3QA4 3LEU DE000A0S3P43 Deutsche Börse EUROGOV Germay -3 3LEW DE000A0S3P68 3LEQ DE000A0S3P0 Deutsche Börse EUROGOV Germay 3-5 3LEX DE000A0S3P76 3LER DE000A0S3P9 Deutsche Börse EUROGOV Germay 5-0 3LEY DE000A0S3P84 3LES DE000A0S3P27 Deutsche Börse EUROGOV Germay 0+ 3LEZ DE000A0S3P92 3LET DE000A0S3P35 Deutsche Börse EUROGOV Frace -0 7D5J DE000A0YK025 4D0U DE000A0YKZA4 Deutsche Börse EUROGOV Frace -3 7D5I DE000A0YK07 4D0T DE000A0YKY95 Deutsche Börse EUROGOV Frace 3-5 7D5K DE000A0YK033 4D0V DE000A0YKZB2 Deutsche Börse EUROGOV Frace 5-0 7D5L DE000A0YK04 4D0W DE000A0YKZC0 Deutsche Börse EUROGOV Frace 0+ 7D5M DE000A0YK058 4D0X DE000A0YKZD8 3 TR Total Retur Idex, PR Price Idex
Deutsche Börse AG Versio.2 Guide to the November 20 Deutsche Börse EUROGOV Idices Page 20 6.2 Your direct Lie to Deutsche Börse Deutsche Börse AG Iformatio o prices ad idex cocepts Market Data & Aalytics Customer Service Phoe: +49-69-2-8 00 Fax: +49-69-2-45 0 Email: Customer.Service@deutsche-boerse.com Idex Licesig Market Data & Aalytics Issuer Data & Aalytics Phoe: +49-69-2-34 40 Fax: +49-69-2-39 42 Email: mda.issuer@deutsche-boerse.com Iteret Mailig Address Deutsche Börse AG 60485 Frakfurt/Mai Germay