Convenience Yield

Convenience yield is the amount of benefit associated with physically owning a particular asset, rather than owning a futures contract for that asset. It is the degree of benefit or premium that is derived from directly owning that particular asset. Convenience yield does not address the benefits of holding a derivative contract on the asset. Convenience yield is based on actual possession and not on owning a futures contract or some other arrangement. It holds its significance when there is a shortage of certain commodities.

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