Abstract: Method for establishing a commercial real estate price change index supporting tradable derivatives. The method utilizes a database of price changes actually experienced by individual commercial properties including allowing for gradual accumulation of price data. The database is filtered with selected data filters and time-weighted dummy variables are specified. A repeat-sales regression is performed on the filtered database to create the index. The repeat-sales regression includes a weighted least squares estimation in which weights are determined in a three-stage regression process. A ridge regression noise filter in which a first order autocorrelation coefficient in estimated index price-change returns controls the ridge estimation, and the first autocorrelation coefficient is near 0. The index is optimized for derivative trading purposes by excluding backward adjustments and a scope and frequency for the index is selected. The index may be used for tradable derivatives.