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A nice thought .. I did play with that but the difference between taking an
annual average versus using the individual quarterly numbers just won't get
me there - even if it helps a little the difference that I need is HUGE
(more than double!).
Similarly the premium issue would have to exist at every roll for a total of
369 (lost) points or 3.7 points per roll! (At that average premium above
fair value the arbitrageurs would now be worth more than Bill Gates.)
-----Original Message-----
From: Gary Fritz [mailto:fritz@xxxxxxxx]
Sent: Wednesday, October 28, 2009 8:49 AM
To: Chris Evans; omega-list@xxxxxxxxxx
Subject: Re: Recreating the back adjusted vistorical number
Why estimate your tbill return? You can get accurate historical data at
http://www.federalreserve.gov/RELEASES/H15/data.htm. Monthly returns of
3-month tbills is at
http://www.federalreserve.gov/RELEASES/H15/data/Monthly/H15_TB_M3.txt.
-------- Original Message --------
Subject: Re: Recreating the back adjusted vistorical number
From: Chris Evans <evanscje@xxxxxxxxxxxxx>
To: 'DH' <catapult@xxxxxxxxxxxxxxxxxx>
Cc: "'Omega List'" <omega-list@xxxxxxxxxx>
Date: 10/28/2009 9:34 AM
> 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.
>
>
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