Hi I did go through the previous posts on this topic but still confused. I
am basically researching on some ideas and need continuous time futures
data. At any point in time I basically have three futures, F1, F2 F3. They
basically have monthly, 2 month and 3 month expiries. I have daily OHLC
data for all of the, but need to create continuous time series.
I am basically researching on convergence-divergence ideas in price space.
What is wrong with just the following procedure
1) Just grab the F1 price and at the roll data switch to F2 or the new
front month?
When I went through the papers and discussion on creating continuous
contract, please correct me if I am wrong but it seemed that the procedure
is the follows, to get the front month contract.
Say today is expiry and we have the data for today
F1 - x F2 - y F3 - z
Here x is the settlement price of the expired contract F1. I go back in the
past until the previous expiries and multiply all prices by y/x. At the day
of expiry I get for the price of F1 as x*y/x = y. Is that true?
If yes the problem with this approach is that how am I supposed to get
continuous prices for F2 and F3, since it is not the case that I have an F4
or F5, I strictly have only 3 contracts at any given point in time. Please
help. I think I am lost.
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