ABSTRACT
A methodology is the recipe that produces a price assessment. It is both a user's guide to how a price reporting agency (PRA) comes up with its price assessments as well as a 'how to' guide for the individual price reporter covering the market. This chapter traces some key developments in the design of PRA methodologies and looks in detail at some of the most commonly employed methodologies in benchmark commodity pricing. The International Organization of Securities Commissions (IOSCO) principles also require "transparency of procedures by which PRAs will advise stakeholders of any proposed changes to a methodology, including the opportunity for stakeholder comment on the impact of any changes". A very large number of PRA methodologies state that their price reporters will carry out a "survey of market participants" in order to establish the correct level of prices. Some of the market assessments that the PRAs make are based instead on automated assessments of 'relative value'.
