caa a22 4500 463187717 CHVBK 20180406164858.0 cr unu---uuuuu 170326e20070201xx s 000 0 eng 10.1007/s11156-006-0008-5 doi (NATIONALLICENCE)springer-10.1007/s11156-006-0008-5 Oil convenience yields estimated under demand/supply shock [Elektronische Daten] [William Lin, Chang-Wen Duan] This paper extends the call option model of Milonas and Thomadakis (1997) to estimate oil convenience yields with futures prices. We define the business cycle of a seasonal commodity with demand/supply shocks and find that the convenience yield for crude oil exhibits seasonal behavior. The convenience yield for West Texas Intermediate (WTI) crude oil is the highest in the summer, while that for Brent crude oil is the highest in the winter. This implies that WTI crude oil is more sensitive to high summer demand and that Brent crude oil is more sensitive to shortages in winter supply. Convenience yields are negatively related to the inventory level of the underlying crude oil and positively related to interest rates due to the business cycle. We also show that convenience yields may explain price spread between WTI crude oil and Brent crude oil. Our computed convenience yields are consistent with Fama and French (1988) in that oil prices are more volatile than futures prices at low inventory level, verifying the Samuelson (1965) hypothesis that future prices are less variables than spot prices at lower inventory levels. Springer Science+Business Media, LLC, 2006 Business cycle nationallicence Convenience yield nationallicence Demand/supply shock nationallicence Theory of storage nationallicence Two-period model nationallicence Lin William Department of Banking and Finance, Tamkang University, Tamkang, Taiwan aut Duan Chang-Wen Department of Banking and Finance, Tamkang University, Tamkang, Taiwan aut Review of Quantitative Finance and Accounting Kluwer Academic Publishers-Plenum Publishers; http://www.springer-ny.com 28/2(2007-02-01), 203-225 0924-865X 28:2<203 2007 28 11156 https://doi.org/10.1007/s11156-006-0008-5 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.1007/s11156-006-0008-5 text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- Lin William Department of Banking and Finance, Tamkang University, Tamkang, Taiwan aut NATIONALLICENCE 700 1- Duan Chang-Wen Department of Banking and Finance, Tamkang University, Tamkang, Taiwan aut NATIONALLICENCE 773 0- Review of Quantitative Finance and Accounting Kluwer Academic Publishers-Plenum Publishers; http://www.springer-ny.com 28/2(2007-02-01), 203-225 0924-865X 28:2<203 2007 28 11156 Metadata rights reserved Springer special CC-BY-NC licence nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-springer