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I'm trying to build a multi year time series for a 3 month futures contract. How do I handle rolls? On the day of roll, volatility is high and I want to roll over to next contract series in a way that gives roll adjusted prices.

What sort of interpolation I can use or proxy using spreads? ANy suggestions welcome

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  • $\begingroup$ Could you please explain what you want to achieve with your model. Also you'd better roll some time before the expiration. $\endgroup$ – zer0hedge Apr 28 '17 at 15:22
  • $\begingroup$ I want to have a multi year 3 month futures contract price series for calculation of VaR in my portfolio. So goal is to handle rolls in a way such that there is zero effect of roll on the net VaR $\endgroup$ – user236215 Apr 28 '17 at 15:35
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    $\begingroup$ You should add the above comment to your question. The more details you provide, the higher probability that you will receive an answer and positive evaluation of your question by community. $\endgroup$ – zer0hedge Apr 28 '17 at 16:19
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The Var depends only on the daily changes in futures price. So you create a series of daily changes and you simply omit the day when the roll occurs.

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  • $\begingroup$ Alternatively, for the day in which the roll occurs, take the daily change for the next contract (the one which does not expire). $\endgroup$ – Alex C Apr 29 '17 at 18:40
  • $\begingroup$ I agree @alexc that is even better $\endgroup$ – dm63 Apr 29 '17 at 18:43

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