Search results for "Convenience yield"
showing 2 items of 2 documents
Theory of storage implications in the European natural gas market
2023
The theory of storage stands that futures prices should be equal to the spot price plus the interest forgone in storing the commodity and the warehousing costs minus the convenience yield on the inventory. In this paper, we test several implications of the theory of storage on the pricing of United Kingdom natural gas futures. We obtain partial evidence for the theory of storage as a complete explanation of the pricing of this futures contract. Explicitly, (i) we obtain evidence to explain convenience yield seasonality with spot price volatility, unexpected demand shocks when supply is tight, inventory variations, and trading activity in the futures markets; (ii) we obtain indirect evidence…
The inconvenience yield of carbon futures
2021
Abstract Since 2009, the European Carbon Futures Market has been in a permanent contango situation that is characterised by systematic negative convenience yields that allow investors to exploit profitable arbitrage opportunities. The objective of this paper is to analyse the possible drivers of these negative convenience yields. Our empirical results indicate that although some carbon trading variables are behind this contango situation, the carbon inconvenience yield is better explained if other financial markets and variables are considered, suggesting a financialization of the European Carbon Futures Market.