The “roll yield” myth

Research output: Contribution to journalArticlepeer-review

10 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
DOIs
StatePublished - 2018

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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