Commodity futures pricing is complicated by costs for storage of the underlying commodity. When the asset is

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Commodity futures pricing is complicated by costs for storage of the underlying commodity.

When the asset is willingly stored by investors, the storage costs net of convenience yield enter the futures pricing equation as follows:

F0 = P0 (1 + rf + c)

T The non-interest net carrying costs,

c, play the role of a “negative dividend” in this context. P-63

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ISE Investments

ISBN: 9781266085963

13th International Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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