Backtesting futures portfolio

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Joined: Sun Apr 19, 2009 12:51 pm

Backtesting futures portfolio

Postby josephpang100 » Wed Mar 12, 2014 10:44 am

Dear Professor,

I am new in backtesting portfolio containing futures. I am currently facing several issues and I hope
you can shed some light into them:

1. First how to calculate the return of an individual futures and the return of an portfolio of futures when
there is leverage involve? I am sure we can calculate P/L of each futures position (simply Mark to Market
p/l, but how to transform them into return?

2. Do I need to set up some margin call mechanism in the backtesting?

3. When I do my portfolio optimization, should I use the underlying index to do it or should I construct a
futures time series first and then do portfolio optimization? How can I adjust the optimization for
leverage in the case of futures contract?

4. Do you have any paper which talks about backtesting futures portfolio?

Thanks in advance,

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