The concepts of Contango and Backwardation are related with the term structure of the futures contracts. During the life of a contract, the difference between the futures price and the expected future price is called basis. At the end of the contract’s life, the futures price converges to the expected future spot price. Each month, […]
Data Science
Creating Term Structure of Futures Contracts Using R
The terms structure of the futures contracts for a specific asset is generated by the contracts prices at different expiration times. The contracts have different prices on each expiration date and there is an underlying relationship between them that is reflected with different shapes. The most common shapes are called normal or inverted forms. These […]
Different Parties in the Futures Market
The future market is composed of different types of agents that go to the futures market for a specific purpose. These agents raise the trading volume and open interest during the contract life. Overall the futures market is composed of speculators and hedgers. Speculators The speculators can be classified into market makers, day traders and […]
Comparing Futures vs Spot Prices for WTI Crude Oil
In this post, we will be comparing the Futures vs Spot Prices for WTI Crude Oil, i.e., the WTI Futures series with the WTI Spot series. The futures prices generally show high volatility and they are more volatile than the underlying spot price. For this purpose, it would be interesting to compare future and spot […]
R Visualization of Statistical Properties of Future Prices
Future contracts have some particular properties that make them a special assets class. In this article, we will learn about these statistical properties by visualizing them in R. Futures Prices have High Volatility and Distribution with Leptokurtic Shape First of all future contracts are well known for their higher volatility. The price distribution of future […]
Exploring Crude Oil (CL) Future Data from Quandl in R
It would be useful to download a dataset of historical future contract prices and explore it using R programming language. For this purpose we will load the futures historical data of Crude Oil (CME_CL1) from the CHRIS database of Quandl. The nomenclature to download futures data from Quandl is the following: CHRIS/{EXCHANGE}_{CODE}{NUMBER} CHRIS refers to […]
How to Create Futures Continuous Series
Futures Contracts A future contract is a standardized contract with precisely specified contract terms. This contract is transacted between a purchaser and a seller. The purchaser of the future contract will receive the delivery of the goods and pay for it, while the seller of the futures contract is obligated to deliver the goods and […]
Overview of Derivatives with R Tutorial
This tutorial on derivatives with R provides a conceptual and practical guide to analyzing derivatives instruments such as Futures Contracts and Options using the R programming language. The tutorial has a well balanced structure between theoretical concepts and practical examples and aims to show important properties of derivatives instruments using R. The first part of […]
Neural Networks Overview
Neural networks is an advanced technique which is within the field of Deep Learning. As we know, machine learning involves working with algorithms that try to predict a target variable or segment data to find relevant patterns without human intervention. In contrast, in deep learning architecture there is more than one layer of these algorithms […]
K-Means Algorithm Python Example
In this post, we will provide an example of the implementation of the K-Means algorithm in python. This K-Means algorithm python example consists of clustering a dataset that contains information of all the stocks that compose the Standard & Poor Index. This example contains the following five steps: Obtain the 500 tickers for the SPY […]