Markets: A Rigorous Course
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M10 · Problem 4 ★ Check

Implied convenience yield

Illustrative MCX crude prices: spot-equivalent ₹7,200/bbl, one-month future ₹7,130, three-month future ₹6,990. Take r=5.5%r = 5.5\%, u=4%u = 4\%. Compute the implied convenience yield at both maturities. Is the curve in contango or backwardation? What does Proposition 10.4 say about inventories?

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Commas, ₹, % and 1e-3 notation are accepted.

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