Learning objectives: Explain the formula for pricing commodity forwards. Describe an arbitrage transaction in commodity forwards and compute the potential arbitrage profit. Define the lease rate and explain how it determines the no-arbitrage values for commodity forwards and futures. Describe...
Learning objectives: Explain the key differences between commodities and financial assets. Define and apply commodity concepts such as storage costs, carry markets, lease rate, and convenience yield. Identify factors that impact prices on agricultural commodities, metals, energy, and weather...
The convenience yield an intangible benefit of commodity ownership. It is derived from (explained by) the observed forward/futures price.
David's XLS is here: https://www.dropbox.com/s/orv4ljunme62kgl/062018-coc-convenience1.xlsx
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