i don't know what exactly you're doing but to deal with that you need to calculate the adjusted price ( adjusted return ) taking into account the rollover or things will get totally whacked. how to do that is in schwager's book or probably any decent intro futures book. if you can't find it, i can try to explain it but it's a little tricky and i bet a book can do better. essentially you calculate the daily returns not counting the rollover day ( you have to skip that one because that's not a real return ) and then calculate the new adjusted prices based on those returns. then you use thos adjustede prices to do whatever you're doing.
On Wed, Nov 12, 2008 at 12:27 PM, Jorge Nieves wrote:
Hello, I am testing an econometric model for trading futures on commodities. I am setting up the back-testing phase, but I am facing a dilemma about what is the best way to "easy" the transition for when futures mature into the next open contact. For now I am testing the model using the generic CL1 crude front contact. I would like to ensure that the rolling after maturity of each calendar contract does not generate false signals. Any one has any suggestion about what will be the best approach and why? Thanks, Jorge Nieves [[alternative HTML version deleted]]
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