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Convenience yield

• The extra advantage that firms derive from holding the commodity rather than the future.

• Is the assumed or expected benefit of holding a long position in a physical commodity. Othen this holding is to satisfy existing near-term delivery commitments or to maintain uninterrupted manufacturing processes. It highlights the marginal value of an inventory relative to the anticipated usage. High convenience yields tend to occur in inverted or backwardation markets. In these situations, the costs of being without the physical commodity are greater than the premium paid to hold the commodity. A positive convenience yield is greater than the sum of the financing plus other storage carrying costs.

 
 

Follow this link for all the terms related to yield.

 
 Embedded terms in definition
 Backwardation
Carrying costs
Commodity
Delivery
Future
Inventory
Long position
Long
Marginal
Plus
Position
Premium
Without
Yield
 
 Related Terms
 

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