Futures Spreading Greeks... Or just term structure greeks?

ok .. here it says " In sum, we found that the net interest, storage and convenience yield (NISC) of WTI futures are primarily driven by two uncorrelated drivers. The first driver exhibits a term structure similar to the yield curve and the second driver was hypothesized as a proxy to the convenience yield."

its basically stating that.. it is drawing the three factors out of the price data to show there influence on the price of the each futures contract..

interestingly it goes on further to say..

"A portfolio of WTI future contracts can be hedged (97.8% effective) for non-spot price changes using only two (2) different future contracts."

which seems amazing given the volatility of crude oil
 
Thanks for chiming in Ogarbitrage.

The author seems to be implying in the next paper that he will be looking to hedge the driver or principal components with a Eurodollar contract due to its yield curve-like structure.

No talk of correlation, yet. Are Euro$ really used in practice? is this guy way out on left field? Mind you, we are just searching for Arb/hedge structure not hedging for a producer.
 
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ogarbitrage said:
I highly recommend Pilipovic's Energy Risk. The interested reader would also benefit from Errera and Brown, Geman, Geman, and Fabozzi, Fuss, and Kaiser. Of these, I find Pilipovic and Geman to be the most worthwhile for energies specifically.

For STIRs, I understand the bible is The Treasury Bond Basis, however I've never read it.
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"Treasury Bond Basis" isn't about STIRs, it's about bond futures. The point is that there's a whole class of "statistical"-ish techniques/models that can be applied to a given futures strip, if you suspect that there is an embedded underlying structure imposed by fundamental economic forces.

I have seen papers that talk about the use of factor models in the context of commodity futures, rates, currencies, equities etc.
 
Martinghoul said:
"Treasury Bond Basis" isn't about STIRs, it's about bond futures. The point is that there's a whole class of "statistical"-ish techniques/models that can be applied to a given futures strip, if you suspect that there is an embedded underlying structure imposed by fundamental economic forces.

I have seen papers that talk about the use of factor models in the context of commodity futures, rates, currencies, equities etc.
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Like for example how to derive where on the strip, and of what value the fed will be raising rates?
 
Going back to analogies with Spread Greeks..

I was hoping somebody could enlighten us on measures of front month sensitivity of a spread. Gamma in options terminology.

There seems to be a trade of between the front month spread liquidity and back month spread consistency in mean variance. It exists, but not consistently as you would find it in the options term structure.

Also, can someone can show me how to get IBKR exchange traded spreads? Even IBKR support doesn't know how.

Thank you kindly.
 
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xandman said:
Going back to analogies with Spread Greeks..

I was hoping somebody could enlighten us on measures of front month sensitivity of a spread. Gamma in options terminology.

There seems to be a trade of between the front month spread liquidity and back month spread consistency in mean variance. It exists, but not consistently as you would find it in the options term structure.

Thank you kindly.
More...

are you still talking about futures or are you talking about options?
 
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