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I'm not sure I follow you .. let me say it a slightly different way:
The end prices are the same (1050) ..
The capital gains available in each time series must be identical so the net
price change AFTER CARRY is the same
Therefore the forward price of the index = the start price of the
back-adjusted contract
So far, very easy .. now what is the calculation that does that. I (think
I)know that too:
Start price*(1+net carry)^periods = fwd price
That's all there is to this (as far as I can tell) so now I am struggling
to get that implied net carry number to make some sense
-----Original Message-----
From: DH [mailto:catapult@xxxxxxxxxxxxxxxxxx]
Sent: Wednesday, October 28, 2009 10:04 AM
To: Omega List
Subject: Re: Recreating the back adjusted vistorical number
You're never going to get it to work using back-adjusted (addition
method) contracts and calculating percentage gain/loss. If the real
contract went from 100 to 110, that's a 10% gain. If your adjusted
contract goes from 500 to 510 over the same time period, that's only a
2% gain. I don't see any easy way to reconcile the two. Bad data in, bad
result out.
--
Dennis
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