Calendar Spreads, Risk Premium and the Convenience Yield

16 Pages Posted: 29 Jul 2009

See all articles by Sami Attaoui

Sami Attaoui

NEOMA Business School

Constantin Mellios

Université Paris I Panthéon-Sorbonne

Pierre Six

Neoma Business School

Date Written: July 27, 2009

Abstract

This paper studies optimal calendar spreads in commodity futures markets while taking into account a stochastic convenience yield. We show that a convenience yield imperfectly correlated with the spot commmodity price results in an optimal strategy composed of two commodity futures contracts. These strategies reveal a calendar spread effect through the positive correlation between the two futures contracts. These strategies can easily be computed and analyzed under the Samuelson hypothesis.

Keywords: commodity futures markets, convenience yield, calendar spread, investment, Samuelson hypothesis, commodity futures prices correlation, market prices of risk

JEL Classification: G11, G12, G13

Suggested Citation

Attaoui, Sami and Mellios, Constantin and Six, Pierre, Calendar Spreads, Risk Premium and the Convenience Yield (July 27, 2009). Available at SSRN: https://ssrn.com/abstract=1439669 or http://dx.doi.org/10.2139/ssrn.1439669

Sami Attaoui

NEOMA Business School ( email )

Boulevard André Siegfried - BP 215
Mont Saint Aignan, 76825
France

Constantin Mellios

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France
+33140463366 (Fax)

Pierre Six (Contact Author)

Neoma Business School ( email )

1, rue du Maréchal Juin - BP 188
Mont Saint Aignan Cedex, Normandy 76825
France

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