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Updating the estimation of the supply of storage

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  • Carl R. Zulauf
  • Haijiang Zhou
  • Matthew C. Roberts

Abstract

An updated supply of storage is estimated to reflect recent developments in the literature. This study adds a measure of price variability, specifically implied volatility. It also adds a measure of the call‐option value to sell stocks before the end of the storage period, specifically a measure developed by Heaney (2002). The model is estimated for U.S. soybean stocks carried between crop years. A quadratic relationship is found between stocks to use ratio and implied volatility. A statistically significant, inverse, linear relationship is found between the storage‐cost–adjusted spread and the estimated call‐option value. This finding is consistent with the much debated idea that convenience yield is a return to storage that can offset losses from storage when intertemporal price spreads are negative. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:657–676, 2006

Suggested Citation

  • Carl R. Zulauf & Haijiang Zhou & Matthew C. Roberts, 2006. "Updating the estimation of the supply of storage," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 26(7), pages 657-676, July.
    • Handle: RePEc:wly:jfutmk:v:26:y:2006:i:7:p:657-676
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    Cited by:

    1. Kim, Soohyeon & Kim, Jihyo & Heo, Eunnyeong, 2017. "Convenience yield of accessible inventories and imports: A case study of the Chinese copper market," Resources Policy, Elsevier, vol. 52(C), pages 277-283.

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