Relative Value

Relative Roll Proof of Principle Results

1 Introduction 2 Explore the Roll Yield 3 Simple Model 4 Comments 1 Introduction The aim of this write-up is to give some proof of principle results on extracting P&L from the difference in roll yield between two correlated commodities. We define the roll yield as the daily compound return that changes the further dated contract price to the near dated contract price. Mathematically we write