Futures Roll Adjustment with Cumulative Gaps and Return Chaining
Summary
This module constructs a continuous futures series by identifying contract roll dates and calculating the price gap between the expiring contract and the next contract. It accumulates those gaps through time and can align the adjusted series at its end. A diagnostic frame records roll dates, relevant prices, and each gap, helping users inspect how the adjustment was formed.
An optional transformation converts adjusted price changes into a compounded return series by dividing each change by the prior raw price, then accumulating the returns. The module also includes helpers for generating candidate roll dates, such as available dates at the start of each month or static calendar dates, and for finding prior available observations. Its behavior depends on the supplied dataset, selected open and close columns, and roll-date convention. The text is implementation documentation rather than an empirical comparison of roll methods, and gives no evidence that one adjustment convention is superior for any particular market or use.
Key ideas
- The roller estimates each contract transition gap using prices around the selected roll date.
- Cumulative gaps are applied to create an adjusted futures price series, with an option to align the series at its end.
- A diagnostic table exposes the dates, prices, and gap associated with each roll.
- An optional compounding step converts adjusted changes into a nonnegative index using returns relative to prior raw prices.
- Roll date generation includes available monthly dates and static calendar targets, so results depend on the chosen convention and data.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.