cost-of-carry

Interest rate parity applies the cost of carry (COC) model to enforce an equilibrium (indifference) between two choices: 1. translate the 1,000 EURs immediately at the spot FX rate, and subsequently grow them at the USD risk-free rate for two years; or 2. hold the 1,000 EURs, grow them at the...

The convenience yield an intangible benefit of commodity ownership. It is derived from (explained by) the observed forward/futures price. David's XLS is here: https://www.dropbox.com/s/orv4ljunme62kgl/062018-coc-convenience1.xlsx

In the cost of carry (COC) model, storage cost is treated like negative income. If we reduce the total storage cost over the life of the futures contract, given by (U), then the theoretical futures price is given by F(0) = [S(0) + U]*exp(rT). If we can represent storage cost as a constant...

The cost of carry model returns a theoretical forward price, which is based on the NET cost of ownership David's XLS is here: https://www.dropbox.com/s/8p762uz635zcvm5/060618-yt-coc-v2.xlsx