RE: Recreating the back adjusted vistorical number

["Chris Evans" <evanscje@xxxxxxxxxxxxx>]

Thanks for your reply .. so now my tiny little brain needs to break this
down to specifics .. where my carry factor (t-bills-divs) = 2.25% you are
saying it's too low .. OK , so how do I make it bigger.  The bill rate is an
annual average.  You're saying I need to gross up the t-bill figure somehow
so the carry is applied "all at once" .. How (exactly)?

-----Original Message-----
From: DH [mailto:catapult@xxxxxxxxxxxxxxxxxx] 
Sent: Tuesday, October 27, 2009 7:37 PM
To: omega List
Subject: Re: Recreating the back adjusted vistorical number

> So why is the
> sum of the carry adjustments so much greater than I get when allowing for
> t-bills-dividends .. this shouldn't be complicated

For one thing, you're using average t-bills and interest x days 
remaining over the whole period. But the adjustment only happens once 
every 3 months. So it's not the average carry for the length of the 
contract, which slowly decreases to zero, it's the 3-months-ahead carry 
applied all at once.

To do it right, use the individual contracts and calculate the carry 
from the premium (futures - cash) at the beginning of the contract.

-- 
   Dennis