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Hi all.
I'd appreciate any comments from the experts regarding methods and
techniques for assembling a continuous data series from individual
contracts. I'm looking at WTI.
The logic of using a spread adjusted series (described by Schwager,
"Complete Guide to Futures Markets") escapes me. The adjusted series is
essentially made up and you'd never actually trade these prices. Why use
them in system development? If it's time to roll over and the next active
contract is trading $0.10 higher then that's the price you pay to stay in
the market. It seems that you'd want to incorporate that fact into a
system rather than ignore it.
Likewise, the continuous contracts by CSI. According to Sweeney
("Campaign Trading") the ranges have been "stabilized" and, unlike the
prices actually traded, they do not increase as contract expiration
nears. Again, it seems like this fact should be accounted for rather than
adjusted away.
Regards,
Bill Vedder
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