SS13 Q

“A commodity futures buyer earns a collateral yield on the margin provided to buy the contract.”

True or False?


Collateral return or collateral yield comes from the assumption that the full value of the underlying futures contract is invested to earn the risk-free interest rate—that is, that an investor long a futures contract posts 100 percent margin in the form of T-bills (in such a case the futures position is said to be fully collater- alized). The implied yield is the collateral return.


100% true

collateral yied is always positive as it is the risk free rate earned

Yes. I didn’t notice that the buyer posts 100% margin.