Deduce Future price from the index

[ADMP]

Hi,

I downloaded some future prices. My problem is that the history of some of these futures is not long enough. For example the dax future start at the end of 1990, but I need a start somewhere in the 80's. Is there a way to calculate synthetic future prices from the index for the period when the future didn t exist but the index already existed? Something like deducing the cash performance from the index performance? Has someone experience with this sort of thing?

ADMP

[sluggo]

If the stock index futures price is "too high" in relation to the actual index itself, a trader can lock in a risk-free profit by shorting the futures, buying the stocks of the index, holding both until expiration of the futures contracts, and liquidating. Similarly if the stock index futures price is "too low", a trader can profit by shorting the stocks, going long the futures, holding until expiration, and liquidating. The only trick is deciding how high is "too high" and how low is "too low". Economists and arbitrageurs have figured out the answer and they call it "Fair Value" of the futures.

Explanations of stock index futures Fair Value can be found in many places on the internet. Three examples are listed below, which discuss the example of the S&P 500 stock index futures.

http://tinyurl.com/338h6h
http://tinyurl.com/2rly3w
http://tinyurl.com/2vb75u

However, just because there is a no-arbitrage fair price for the futures, doesn't mean they always trade at that price! Particularly at the high and low of the day, the futures prices may not be identical to the cash index price plus Fair Value. So constructing daily bars with Open, High, Low, Close may involve a good deal of approximation error.

[ADMP]

Thanks Sluggo.