Ratio Adjusted Time Series with Transaction Costs

NexusFi · 2015-01-15T17:59:56-05:00

I am currently in the process of writing my first trading strategy. I calculated ratio adjusted data and I am wondering how I can include transaction costs in ratio adjusted data? The ratio adjustment is calculated as follows: Ratio adjustment = (Price new contract - Price old contract)/(Price old contract) Adjusted prices = (all old futures * ratio adjustment) + Prices new contract Since I use historical data ranging from the 80's to the end of 2014 there are multiple rolls. For every I make …

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Updated January 15, 2015

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Ratio Adjusted Time Series with Transaction Costs

January 15th, 2015, 05:59 PM	#1 (permalink)
thenoob Maastricht/Netherlands Posts: 2 since Jan 2015 Thanks Given: 0 Thanks Received: 0	I am currently in the process of writing my first trading strategy. I calculated ratio adjusted data and I am wondering how I can include transaction costs in ratio adjusted data? The ratio adjustment is calculated as follows: Ratio adjustment = (Price new contract - Price old contract)/(Price old contract) Adjusted prices = (all old futures * ratio adjustment) + Prices new contract Since I use historical data ranging from the 80's to the end of 2014 there are multiple rolls. For every I make these adjustments (iterative process). This formula is lacking transaction costs. How should I account for transaction costs?