Stima developed an Energy price reference index, named IStima. This initiative aims to provide market participants with information on energy price trends and volatility seen on most liquid forward contracts traded at BBCE. We believe that IStima could also be used as settlement index for financial products and derivatives once we have a consolidated energy financial market.
What is IStima?
1) Products: forward contracts with settlement dates on M0, M1, M2 and M3 (“M” = month)
2) Product Prices: prices of each Product will be calculated based on prices of the last ten trades of each day weighted by their traded volume (MW average) . In case there are fewer than six trades on a specific day, it will also consider trades done on the previous day. If there are between six and ten trades in a given day, only trades from the current day will be considered.
3) Portfolio: it will be balanced daily based on Products liquidity calculated following the Product Prices.
4) Index: index value is given by multiplying the Portfolio from previous day by the price returns for M0, M1, M2 and M3 of a current day. Data series starts at 100 as of 12/31/2017.
5) Unity: points
What is IVol?
1) Data window: 126 days
2) Data: IStima daily returns
3) Metodology: EWMA with Lambda 0.96. This coefficient weights heavier the recent volatility in total index calculation. Stima simulated internally and concluded that the coefficient 0.96 best fits its market risk indicator.
4) Unity: % per year