Convenience Yield and Commodity Markets
Lautier, Delphine (2009), Convenience Yield and Commodity Markets, Bankers, Markets & Investors, 102, p. 59-66
TypeArticle accepté pour publication ou publié
Journal nameBankers, Markets & Investors
MetadataShow full item record
Abstract (EN)This article explains the role of the convenience yield in the relationships linking spot and futures prices in commodity derivatives markets. First, this variable restores the non arbitrage relationship between the prices of the underlying asset and the derivative instrument. Second, it allows establishing connections between commodities and other assets. Third, it explains why firms store at an apparent loss. The convenience is however a controversial concept. Indeed, the absence of direct evidence for this quantity signifies, first that it is necessary to address the issue of estimating it and second, that it can be accused of being an ad hoc construction. Moreover, in spite of an early interest for this concept, there is no real consensus on its definition. This article aims at gathering all the reasonable explanations which were proposed trough time in the literature.
Subjects / KeywordsConvenience yield; Non storable commodities; Arbitrage; Inventory; Commodity
JELO13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products
G14 - Information and Market Efficiency; Event Studies; Insider Trading
G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
E43 - Interest Rates: Determination, Term Structure, and Effects
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