If risk free rate is Great than lease rate, then Forward rate must be greater than the spot rate If risk free rate is less than the lease rate, then Forward rate must be less than the spot rate.
makes sense since S*e^(riskfree - yield + storage)… if we assume storage rate = 0 then lease or yield rules you describe above apply.
Is this irrespective of a significant convenience yield or cash flows on the underlying?
But who can tell me the range of commodity prices?
S*e^*rf-yield +storgae and S*e^rf-storage something like that
lower bound has - convenience yield and plus storage costs and upper only has plus storage costs.
range: low: S*e^(riskfree - yield + storage)… assuming storage = 0 high:S*e^(riskfree - yield + storage)…assuming yield = 0
range: low: S*e^(riskfree - yield + storage)… assuming storage = 0 high:S*e^(riskfree - yield + storage)…assuming yield = 0 is yield the convenience yield? I thought the only thing that changes in the range is the conv yield… can someone explain please?
yes convenience yield
strikershank Wrote: ------------------------------------------------------- > range: > > low: S*e^(riskfree - yield + storage)… assuming > storage = 0 > high:S*e^(riskfree - yield + storage)…assuming > yield = 0 i dont think this is correct.
needhelp - run the numbers…hell, i’ll do it for you. 100 * e^(.06 - .03 + 0) = 100*e^(.03) - that’s your min 100 * e ^ (.06 - 0 +.02 ) = 100*e^(.08) - that’s your max futures price. so does it still not look correct? maybe i’m missing something but i don’t think so… this is a made up example…if we’re given storage costs then you’d input those both times and not drop it. I said assuming storage costs = 0 above as a ‘worst’ case scenario.
range: low: S*e^(riskfree - yield + storage)… assuming convenience yield > 0 high:S*e^(riskfree + storage)…assuming yield = 0 assuming yield is the same as convenience yield i think this is the equation…
Have you noticed that the forward price on crude oil is in Backwardation , any idea how we can make money off this? (in the real world using an online trading account, don’t tell me buy futures and rotate as I don’t know how to do that) I mean we’re all about to finish this program we should be able to make some kind of money applying this material.
i plan to make money by applying this material in an interview to get a job and have them teach me how the real world works.
strikershank Wrote: ------------------------------------------------------- > needhelp - run the numbers…hell, i’ll do it for > you. > > 100 * e^(.06 - .03 + 0) = 100*e^(.03) - that’s > your min > > 100 * e ^ (.06 - 0 +.02 ) = 100*e^(.08) - that’s > your max futures price. > > so does it still not look correct? maybe i’m > missing something but i don’t think so… > > this is a made up example…if we’re given storage > costs then you’d input those both times and not > drop it. I said assuming storage costs = 0 above > as a ‘worst’ case scenario. ok ok. you are right.
strikershank Wrote: ------------------------------------------------------- > i plan to make money by applying this material in > an interview to get a job and have them teach me > how the real world works. I am right there with you!!