The least rate is the borrowing rate a commodity owner charges if (s)he lends the commodity. The least rate is equal to the convenience yield minus the storage cost: L = y - u. Because if the commodity owner LENDS the commodity, (s)he forgoes storage cost but also the convenience yield. In this...
Can you explain these two terminologies w.r.t to commodities futures.
I am getting really confused when to add what to risk free rate.
Also is lease rate always positive .i.e. is it always added to the risk free rate?
With regard to gold futures, why do they have an increasing futures curve (contango)? When we have a positive lease rate, because would the +delta not decrease the forward price... So*exp((r-delta)T)? I am struggling to understand why the curve is upward sloping (I am a bit confused...
I have a couple of questions about the lease rate and cost of carry.
The first is: the lease rate seems to be defined in two very seperate ways. One is growth rate minus discount rate (lease markets) and the ther is convenience yield minus storage costs (carry markets). Maybe I...