Calculating total return on commodity vs roll return

CFA Level III
#1

When to and when not to use collateral yield?

#2

Total return = Roll + Spot + Collateral. Always include.

#3

i’m not sure , if interest rate doesnt change over time , is there colleteral yield?

thinking if you long future , interest rate have already been included into future price that you have to pay (Ft=S0e^rt)

so i think only when interest ratechange, we add colleteral yield to total return

someone please correct me ,if it’s wrong (not sure)

#4

collateral yield is the margin you put up… assumed to be 100% of amount.

#5

This is the key point. The idea of total return including collateral return is based on the assumption that you post 100% collateral and it earning the risk free rate.

Otherwise if you just long a commodities futures, your total return is just roll return + spot return which essentially is just the change in futures price.

#6

Can someone link to the cash and carry thread?

this ties into it