3.3 - Commodities: Applications and Evidence

Question 1

Fully Collateralized Futures Position

Answer 1

Rfcoll = collateral yield + excess return

Or

Rfcoll = collateral yield + spot return + roll yield

Question 2

Roll Yield

Answer 2

roll yield = F0 - Fneg1 - (S0 - Sneg1)

Where…
F0 = current price of futures contract
Fneg1 = last periods price of the futures contract
S0 = current spot price of underlying asset
Sneg1 = last periods spot price of underlying asset