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Updating the estimation of the supply of storage
- Source :
- Journal of Futures Markets. 26:657-676
- Publication Year :
- 2006
- Publisher :
- Wiley, 2006.
-
Abstract
- An updated supply of storage is estimated to reflect recent developments in the literature. This study adds a measure of price variability, specifically implied volatility. It also adds a measure of the call-option value to sell stocks before the end of the storage period, specifically a measure developed by Heaney (2002). The model is estimated for U.S. soybean stocks carried between crop years. A quadratic relationship is found between stocks to use ratio and implied volatility. A statistically significant, inverse, linear relationship is found between the storage-cost–adjusted spread and the estimated call-option value. This finding is consistent with the much debated idea that convenience yield is a return to storage that can offset losses from storage when intertemporal price spreads are negative. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:657–676, 2006
Details
- ISSN :
- 10969934 and 02707314
- Volume :
- 26
- Database :
- OpenAIRE
- Journal :
- Journal of Futures Markets
- Accession number :
- edsair.doi...........88de82bed13ab116800b34de2f62bd5a