Provided are 2 Min data bars for 5 days from the front month future (December 2016 CL) in the “Outright Data” tab and 2 Min bars for 1 Month spreads from the December 2016 to December 2017 contract (recall month codes F = Jan, G = Feb, H = Mar, J = Apr, K = May, M = Jun, N = Jul, Q = Aug, U = Sep, V = Oct, X = Nov, Z = Dec) in the “1M Spread Data” tab.
Spreads are quoted as the first month minus the second month, ie: a CLM7CLN7 spread of -0.52 means that the June 2017 contract is 52 cents lower than the July 2017 contract. For each spread you are provided Bid and Ask data, the BarTp = A indicates the data below is Ask prices, and the BarTp=B flag indicates the data is Bid prices for the given 1m spread.
Using Excel derive a curve of outright futures out till December 2017 (ie: a curve of CLZ6, CLF7, CLG7, CLH7, …. CLX7, CLZ7).
- Show us the curve at different points in day and snapshots of the curve through the week.
- Where was the high and low of Sep17 Future in the given period?
- Provide all formulas used
Note: The timestamps in the outrights may not all be available in the spreads and vice versa so please use only timestamps where data exists for both the outright AND the spreads for consistency/accuracy; in other words you’ll need to clean the data quite a bit first before starting, to ensure you only use data points when the outright and all 1m spreads exist.
Project 2 – DFL Regression
Quarterly DFL Values and Quarterly BRN Spread values
Using software of your choice perform a regression analysis on the two sets of quarterly DFLsagainst the relevant three Month Brent spreads in such a way that you could develop a hedging rule for trading brent spreads as a hedge for DFLs.
- Calculate relevant Beta and Alpha number where necessary.
- Detail regression method used and all relevant formulas.
- Describe what the Beta numbers represent and how they could be used while trading.