COST OF CARRY ON STEROIDS: APPLICATION TO OIL FUTURES PRICING

Eric Girard and Trevor Reid

The International Journal of Business and Finance Research, 2010, vol. 4, issue 2, 153-163

Abstract: This paper develops an empirical cost of carry model with exogenously conditioned convenience yield. The approach is implemented using monthly prices of all futures contracts traded at the New York Mercantile Exchange between 1985 and 2006. Tests indicate that the model fits the data extremely well, much better than the unconditional model. Though the paper concentrates on oil, the approach can be used for any other commodity with well-developed futures markets.

Keywords: Multifactor Models; Futures Pricing; Cost of Carry (search for similar items in EconPapers)
JEL-codes: F3 G1 N2 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:4:y:2010:i:2:p:153-163

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