What Is a Roll Model
A roll model describes the process and cost or benefit of extending a futures or fixed-income position by closing an expiring contract and opening a new one. In futures, this creates roll yield, which can be positive or negative depending on market structure.
How Roll Yield Works
Roll yield comes from the difference between the near-term and longer-term contract prices. In contango, rolling typically produces a negative return, while backwardation can generate a positive roll return. Investors use roll models to estimate these effects over time.
Why Roll Models Matter for Investors
Roll models help traders and portfolio managers forecast total return, manage cash flows, and compare strategies across commodities, interest rates, and currencies. They are also used in fixed income to assess the impact of rolling down the yield curve or reinvesting bonds at different points on the curve.
For more detail on roll yield and its role in futures markets, see the CME Group resource on roll yield.
