The “roll yield” myth

Research output: Contribution to journalArticle

3 Scopus citations

Abstract

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 languageEnglish (US)
Pages (from-to)41-53
Number of pages13
JournalFinancial Analysts Journal
Volume74
Issue number2
StatePublished - Jan 1 2018

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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