[R-SIG-Finance] A question on Forward Price

[Michael Weylandt]

> On Jun 29, 2014, at 4:07 PM, Christofer Bogaso <bogaso.christofer at gmail.com> wrote:
> 
> Hi again,
> 
> I would like ask a small question however not really related to R.
> 
> We all know that non-arbitrage Forward price of any underlying (except
> perhaps Interest Rate) is just the spot price plus the cost of carry.
> Cost of carry again depends on cost of borrowing and convenience
> yield.

Do we know that? 

Consider energy (electricity) futures....

> 
> Therefore my question is, is it true that for most consumable
> commodity like agricultural commodity, crude oil, the Forward market
> will mostly remain in backwardination? Specially for Crude oil it
> looks always remains in Backwardination. Because since they are
> consumable then buying now and storing would be more economical than
> buying it Forward for future use, hence CY would be higher.
> 
> Another related question is, for Crude oil if Forward market becomes
> more in Backwardination then does it imply that, in Future it's price
> is expected to increase, keeping everything else same?
> 
> I really appreciate your thought on the same.
> 
> Thanks and regards,
> 
> _______________________________________________
> R-SIG-Finance at r-project.org mailing list
> https://stat.ethz.ch/mailman/listinfo/r-sig-finance
> -- Subscriber-posting only. If you want to post, subscribe first.
> -- Also note that this is not the r-help list where general R questions should go.