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Calendar spreads in commodity future markets, risk premium and the convenience yield

Sami Attaoui, Pierre Six and Constantin Mellios
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Pierre Six: Pôle Finance Responsable - Rouen Business School - Rouen Business School

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Abstract: This paper studies calendar spreads in commodity futures markets while taking into account a stochastic convenience yield. We show that a convenience yield imperfectly correlated with the spot commmodity price results in an optimal strategy composed of two commodity futures contracts. These strategies reveal a calendar spread effect through the positive correlation between the two futures contracts. These strategies can easily be computed and analyzed under the Samuelson hypothesis.

Date: 2011-05
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Published in Bankers Markets & Investors : an academic & professional review, 2011, n° 112, p.16

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