Cost of carry can be seen as saving in cost and income forgone due to the reason that we chose to buy futures instead of spot. So this cost is added in spot after applying time value to calculate the future price in order to prevent arbitrage. Assume you bought 10000 ltrs of oil to be sold after 6m.Read more
Cost of carry can be seen as saving in cost and income forgone due to the reason that we chose to buy futures instead of spot. So this cost is added in spot after applying time value to calculate the future price in order to prevent arbitrage.
Assume you bought 10000 ltrs of oil to be sold after 6m. Now you will incure storage cost on it and interest cost on the amount you used to buy the oil and other costs if any.
Now if you chose to buy oil futures instead of buying oil itself, you will save the interest cost as well as storage cost and other costs if any, i.e., we add storage cost in cost of carry
DERIVATES
You don't solve this question like that, you have to solve gain/ loss for each day and maintain the mark to market.
You don’t solve this question like that, you have to solve gain/ loss for each day and maintain the mark to market.
See lessNet cost of carry
Cost of carry can be seen as saving in cost and income forgone due to the reason that we chose to buy futures instead of spot. So this cost is added in spot after applying time value to calculate the future price in order to prevent arbitrage. Assume you bought 10000 ltrs of oil to be sold after 6m.Read more
Cost of carry can be seen as saving in cost and income forgone due to the reason that we chose to buy futures instead of spot. So this cost is added in spot after applying time value to calculate the future price in order to prevent arbitrage.
Assume you bought 10000 ltrs of oil to be sold after 6m. Now you will incure storage cost on it and interest cost on the amount you used to buy the oil and other costs if any.
Now if you chose to buy oil futures instead of buying oil itself, you will save the interest cost as well as storage cost and other costs if any, i.e., we add storage cost in cost of carry
See less