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What is Continuous Futures Data and Back-Adjustment
What is Continuous Futures Data and Back-Adjustment
Back-Adjusted Continuous Futures
Our products are "Continuous Futures Data", and there are 2 variants:
Not back-adjusted
Back-adjusted (bk)
What is continuous future data?
Each future contract has an expiration date, so to create a future historical series is needed to concatenate contracts. There are different ways to concatenate futures contracts:
at expiration
when the next contract become more traded than the expiring one
We use the 2°method, so for example when CrudeOil-Aug24 will have a higher volume than CrudeOil-Jul24, the rollover will be made.
What is the difference between "Back-adjusted" and "Not Back-adjusted" continuous futures?
Not backadjusted: it is a simple concatenation of future contract's prices. It has price gaps due to rollovers, since future contracts with different expirations usually have a bit different prices.
Backadjusted (bk): in this variant the rollovers don't cause gaps in the series. To get this result, when we do a rollover:
we compute a ratio between the price of the expiring contract and the price of the new contract
we multiply the historical series by that ratio
we append to the series the prices of the new contract
