# Tag Info

10

Let us denote $\delta$, the Libor's tenor (e.g. 3M), $P(t, T)$ the price of a zero coupon bond price paying 1 unit of currency at $T$, and $L_t(T, T + \delta)$ the forward 3M Libor starting at $T$ and ending at $T+\delta$, seen from $t$: $$L_0(T, T + \delta) = \frac{1}{\delta} \left(\frac{P(0, T)}{P(0, T + \delta)} - 1 \right)$$ The vanilla case: payment at ...

7

As you pointed out there are many ways to adjust for the roll overs. Hence, I guess you would agree that there is no one-size-fits-all answer to this. It really depends on the usage of the data: First think about how the trades in your back test are structured. If they are longer-term trades and you hold over roll overs then think what you would do if you ...

5

There is a major bug when you are getting information from exchanges outside USA. If you get the adjusted prices for BOVESPA (Brazilian Stock Exchange) for example, it will only consider the events that happened using the US Calendar and not the Brazilian calendar of working days, this leads to a lack of information on other exchanges. Be aware of this if ...

4

Consider a date sequence \begin{align*} 0 \leq t_0 \leq T_s < T_e < T_p, \end{align*} where $t_0$ is the valuation date, $T_s$ is the Libor start date, $T_e$ is the Libor end date, and $T_p$ is the payment date. Let $\Delta_s^e = T_e-T_s$. For $0\le t \le T_s$, define \begin{align*} L^e(t, T_s, T_e) = \frac{1}{\Delta_s^e}\bigg(\frac{P(t, T_s)}{P(t, T_e)...

4

An oldie but goodie from 2000. Bob Fulks, Back-Adjusting Futures Contracts, http://www.nuclearphynance.com/User%20Files/7228/cntcontr.pdf The article is a great summary of the most popular adjustment methods. I agree with and would like to stress the author's observation: "There is no "best" method in an absolute sense. All the methods have advantages and ...

3

The other two answers do a good job of explaining, within the context of mathematical financial models, why a convexity adjustment is necessary, but I think a more tangible perspective can also be useful. Consider two forward rate agreements (FRA) to receive fixed and pay floating, with the same fixing date $T_s$ and end date $T_e$. The first pays on the ...

3

I'm going to guess that you might be getting the timing mismatched when computing value weights. (When I was a TA for a first year finance PhD class, I was surprised at how common this error was.) Let $s_{it}$ be the share price of firm $i$ at the end of month $t$. Let $n_{it}$ be the number of shares outstanding of firm $i$ at the end of month $t$. Let \$r_{...

2

Errors in some data can cause the calculation to go awry. For EPD, I have reported that they believe the stock had a 2:1 split on August 21, 2014 and on August 22, 2014. Only one of these splits occurred, so all the split adjusted data is off by a factor of 2 before the split that did not happen. I reported this error in August, but in November I noticed ...

2

Yahoo Historical Prices will seem fine for a while, and then you'll discover missing dates, or that it stops getting updated for a week or so.

2

Yahoo data is good enough, but it has its quirks. As people have mentioned, sometimes it does miss out on corporate actions. I remember a while back I was looking at price for Ford (F) around 1999 , and computing my own adjusted close using yahoo's methodology and noticed that yahoo was missing a dividend payment in 1999(which I verified from bloomberg). ...

1

This seems to be the established convention and I'm not aware of other approaches being commonly (or at all) used. It's specified for example in ISDA Definitions: Section 4.11. FRN Convention; Eurodollar Convention. “FRN Convention” or “Eurodollar Convention” means, in respect of either Payment Dates or Period End Dates ... that the Payment Dates or ...

1

Actually, because IB has TRADES - data adjusted for splits but not dividends, and ADJUSTED_LAST - data adjusted for splits and dividends I can check what I have saved from earlier that day or the previous day against their data, and compute an adjustment factor for only splits, only dividends, and both. Using that, I have an accurate daily adjustment ...

1

This article has some interesting descriptions about the different methods used and when you would them: https://www.quandl.com/collections/futures/continuous Thought it might be somewhat relevant to your question.

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