collateral return? roll yield return?

CFA Level III
#21

If the forward rates are lower than the spot, there will be positive roll return as the forward converges to the spot.

#22

wow, i thought they meant the effect of supply issue and rfr increase would send f curve into contango, resulting in negative roll yield.

#23

For what it is worth, I answered that it went from backwardation to contango as well.

#24

Friends, see page 52 Volume 5, CFAI notes…they explicitly explain the effect of convenience yield in roll return…they say positive effect

#25

kelvinqiu Wrote: ------------------------------------------------------- > collateral return has connection with interest > rate or convenience yield? Really, you post margin(some of collateral) in yeld increase, you get interest on margin.

#26

i had positive for all

#27

florinpop Wrote: ------------------------------------------------------- > i had positive for all same

#28

Positive for all. spot - obvious collateral - rf went up roll - higher convenience yield a clear indication of backwardation…

#29

for roll I put ‘unknown’ because RF went up and Convenience yield went and I thought it was (R-C.Y.) for the calculation.

#30

I put down increase on all. they never said nothing about months past the front month, so I presumed unchanged. if spot goes up and the rest of the curve stays unchanged, backwardation either results or increases, increasing roll return

#31

mark, same as you for roll return. I wrote that it depends on the relationship between the RFR and the convenience yield, both of which increased. But now I don’t remember whether the factors were to be considered independently…

#32

increase on all, agreed there’s no way you can get a negative roll yield with the given info, no matter how you calculate it

#33

I was also thinking that supply shortage could be temp in nature, and as such, only spot would jack higher and the rest of the curve wouldnt react, implying backwo and higher roll r if, however, supply shortage deemed more lasting, the whole curve should fly, and back months could lift even more… anyway, that’s probably going a bit far itstoohot Wrote: ------------------------------------------------------- > increase on all, agreed > > there’s no way you can get a negative roll yield > with the given info, no matter how you calculate > it

#34

^good thinking

#35

think the tip-off here was at the beginning of the vignette. something about the trader rolling st contract. lower f higher backwardization higher roll yield

#36

monki Wrote: ------------------------------------------------------- > spot - positive (supply is tighten) > collateral - positive (RFR is higher) > roll - negative (coz lease rate is higher) > > i think that is correct I agree

#37

I had positive for all as well.

#38

Did anyone consider the risk free going up as well?? If the risk free rate went up with no change in the convenience yield would contango be the result??? Edit: And a negative roll return.

#39

Roll Yield is (Change in Futures - Change in Spot.) So if Change is in Spot is high, unlikely that Roll Yield will be positive. Unless Future price changes has reflected in all these.

#40

doworkson Wrote: ------------------------------------------------------- > Did anyone consider the risk free going up as > well?? If the risk free rate went up with no > change in the convenience yield would contango be > the result??? > > Edit: And a negative roll return. This is not what I answered but I think it makes perfect sense too ! Probably a valid answer too. I considered the effect of the RFR on the collateral return -> positive MH