CFA Practice Question
Which commodity yield can be either positive or negative to the long investor?
II. Roll yield
III. Spot price return
I. Collateral yield
II. Roll yield
III. Spot price return
Correct Answer: II and III
The roll yield can be positive (negative) when the market is in backwardation (contango). The spot price return can be either positive or negative because the price can go up and down.
User Contributed Comments 3
| User | Comment |
|---|---|
| johntan1979 | Don't be too sure that collateral yield can never be negative e.g. negative T-bills like what happened last year. |
| drewnelson | In practice, collateral isn't necessarily held till maturity and can by negative. |
| Sagarsan88 | I am not sure. But if interest rate are negative the collateral yield will still be zero. As you won't invest the margin money in risk free bond but hold it as cash? |