Time Series Decomposition

Surface Distance

Introduction In Precio-Temporal Spread Model we investigated the seasonality and front month dependence of calendar spreads. Subsequently we have build models for all of the calendar spreads we are interested in that take as input features the value of the front month and days until expiry of the near dated contract. The plot below shows an example of one of these models for the C UZ spread.

Precio-Temporal Spread Model

Introduction In this write-up, we explore how the front month price and time to expiry of the front-month contract can be used to model the C UZ spread. Seasonalality Using a similar methodology to the Calendar Spread Seasonal Entries and Exits post, we study the roll adjusted seaonal behaviour of the C UZ spread. The plot below shows the continuous and roll adjusted C UZ spreads since 2000.

Calendar Spread Seasonal Entries and Exits

Introduction Traditionally we identify possible inter-commodity and calendar spreads based on whether the spread is stretched or suppressed compared to historical levels. As a reference we normally use the period closest to expiration of the first contract, say the last forty days before exipry, to compare the spreads. This method can be enhanced by studying the seasonal tendancies of the different spreads. Intuitively this makes to most sense for cyclical commodities such as the agricultural and meats markets.