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Approximation for convenience yield in commodity futures pricing

Heaney, Richard


The pricing of commodity futures contracts is important both for professionals and academics. It is often argued that futures prices include a convenience yield, and this article uses a simple trading strategy to approximate the impact of convenience yields. The approximation requires only three variables-underlying asset price volatility, futures contract price volatility, and the futures contract time to maturity. The approximation is tested using spot and futures prices from the London...[Show more]

CollectionsANU Research Publications
Date published: 2002
Type: Journal article
Source: Journal of Futures Markets
DOI: 10.1002/fut.10036


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