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Ratio Adjusted Time Series with Transaction Costs
Started:January 15th, 2015 (05:59 PM) by thenoob Views / Replies:163 / 1
Last Reply:January 15th, 2015 (05:59 PM) Attachments:0

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Ratio Adjusted Time Series with Transaction Costs

Old January 15th, 2015, 05:59 PM   #1 (permalink)
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Ratio Adjusted Time Series with Transaction Costs

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?

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Old January 15th, 2015, 05:59 PM   #2 (permalink)
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