The value of a futures contract for storable commodities can be determined by the _______ and the model __________ consistent with parity relationships.

Question

Quizplus · Accepted Answer

The value of a futures contract for storable commodities is dependent on the arbitrage-free pricing principle, which is consistent with parity relationships. This principle is based on the cost of carry model, which determines the relationship between the futures price, spot price, and storage costs. The CAPM and APT are not relevant for determining the value of storable commodities futures contracts. Therefore, the correct answer is E, as both the cost of carry model and parity relationships (consistent with the arbitrage-free pricing principle) are used to determine the value of futures contracts for storable commodities.

The Value of a Futures Contract for Storable Commodities Can