Convenience yield


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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.
References in periodicals archive ?
The rise in the convenience yield explains up to 1 percentage point of the trend decline in the natural rate, and it is precisely estimated.
Other related studies on backwardation analyzed the notion of convenience yield (e.
A rational story for the high yields of market-discount munis could be a convenience yield demanded by individuals to deal with the complexities of computing tax liabilities.
Housing Price Variation and the Convenience Yield to Owning a Home" by Jason Thomas and Robert Savickas.
This convenience yield reflects the flexibility created by holding inventory.
Convenience yield for real options is analogous to the dividend rate found in valorizing financial options.
Storage benefits may sound strange, but the notion of a convenience yield is quite intuitive.
For the crop there is assumed to be a world futures market, which can be used to determine the convenience yield rate [[sigma].
In theory, the convenience yield is the flow of services that accrue to the holder of the spot commodity but not to the holder of a futures contract.
The Relationship Between Risk Premium and Convenience Yield Models (Viola Markert and Heinz Zimmermann).
The present paper narrows the focus to just two leading candidates: a rising convenience yield, and the U.
The authors argue that the corporate bond spread reflects a convenience yield that investors attribute to Treasury debt.