Revised rollover measure: an application to Euronext’s wheat futures contract
This paper presents a revised methodology for measuring rollover costs in commodity futures markets, with an empirical application to wheat futures traded on Euronext.
Abstract
The rollover of futures contracts is a critical aspect of commodity investment strategies. Existing measures of rollover costs often fail to capture the full economic impact of position rolling, particularly in agricultural commodity markets where seasonal patterns and supply disruptions create complex pricing dynamics.
We propose a revised rollover measure that accounts for calendar spread behavior, liquidity effects, and the interaction between spot and futures prices. Our measure is applied to the Euronext milling wheat futures contract, one of the most actively traded agricultural futures in Europe.
Results
Our empirical results demonstrate that conventional rollover measures overstate actual costs for systematic investors in wheat futures. The revised measure provides a more accurate foundation for performance attribution in commodity investment portfolios and has implications for the design of commodity indices.