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Convenience Yield
(redirected from Convenience Yields)

   Also found in: Wikipedia 0.01 sec.
Convenience yield
The extra advantage that firms derive from holding the commodity rather than a futures position.

Convenience Yield
The extra gain that an investor receives for holding a commodity rather than an option or futures contract on that commodity. Because of the uncertainty of future events, the convenience yield can be (though is not always) quite high. For example, if one holds so many barrels of oil and there is a sudden disruption in a major pipeline, the value of the physical barrel will increase while the value of a futures contract on oil likely will decrease.


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CONVENIENCE YIELDS With continuous production, inventories are held to maintain the flow of crude from producing fields to refineries.
You might object, "How could convenience yields or liquidity premia be that large?
Convenience yields on the crop is related to the return, and is assumed stochastic in our model, but is a bounded variation process.
 
 
 
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