The benefit or premium associated with physically holding an underlying product or particular good, rather than the (futures) contract or derivative product for that good.
The futures price formula:
F0=S0*(1+r)T+FV(CB,0,T)
where
FV(CB,0,T): the future value of the costs of storage minus the convenience yield
Thus convenience yield decreases the futures price.
Monday, May 24, 2010
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