Futures investors are frequently said to periodically pay or receive the difference in futures prices across contracts with different delivery dates. But this “roll yield” is mythical: No such cash flow occurs—at the time of roll trades or on any other date. However, although the term is a misnomer, the roll yield does contain useful information. It explains when futures gains exceed or fall short of spot-price changes, and for storable assets, it provides information regarding benefits to the marginal holder of a spot position. This article clarifies the actual role of the roll yield.
|Original language||English (US)|
|Number of pages||13|
|Journal||Financial Analysts Journal|
|State||Published - Jan 1 2018|
ASJC Scopus subject areas
- Economics and Econometrics