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I am reading Value-at-Risk Second Edition – by Glyn A. Holton

https://www.value-at-risk.net/futures-nearbys-and-distortions/

From 6.6.1 "The standard means of obtaining continual time series from futures prices is to use nearby series or simply nearbys."

In 6.6.2 (see link above) there is a guide for creating a return-adjusted nearby, I'm not sure I understand without an example. Does it mean that returns are created only for each separate contract in a nearby (not from the end of one to the start of another), and then these series of returns are multiplied by a series of historical prices, to get approximate historical prices? How exactly is this implemented?

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  • $\begingroup$ I worked on series like these for years and never heard the term 'nearbys' - gotta love finance. I suggest you search on 'continuous contract series'. $\endgroup$
    – ThatDataGuy
    Dec 21, 2021 at 13:34

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