convenience yield

The amount of benefit that is associated with physically owning a particular good, rather than owning a futures contract for that good. When a good is easy to come by, an investor doesn't have need to own the actual good at that time, and can buy or sell as he pleases. When there is a shortage of a particular good, however, it is better to already own the good than to have to purchase it during the shortage because it is likely to be at a higher price due to the demand. The convenience yield is the benefit derived in the second scenario.

Copyright©2010 by InvestorWords.com. ALL RIGHTS RESERVED.

Reproduction of all or part of this glossary and/or this page, in any format, without written consent is prohibited. If you have questions about this dictionary please feel free to contact us feedback\@\investorguide.com