Homework Help Question & Answers

When treating futures using the cost of carry model, where does inflation risk be considered? Provide analysis.

When treating futures using the cost of carry model, where does inflation risk be considered? Provide analysis.

0 0
Next > < Previous
ReportAnswer #1

Many factors affect futures prices, such as interest rates, storage costs and dividend income.

The futures price of non-dividend and non-storable assets is a function of the risk-free interest rate, the spot price and the expiry time.

Assets expected to pay income will lower futures prices.

Since the seller of the futures incorporates the cost into the contract, storage costs will always increase the futures price.

The convenience rate of return (indicating the gains of owning another asset rather than owning futures) lowers the price of futures.


answered by: Gavin
Know the answer?
Add Answer of:
When treating futures using the cost of carry model, where does inflation risk be considered? Provide analysis.
Your Answer: Your Name: What's your source?
Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
Free Homework App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.