What is a Convenience Yield?
The convenience yield associated with a given good has to do with the degree of benefit or premium that is derived from directly owning that particular good. The convenience yield does not address the benefits or advantages of holding a contract on the goods, or some sort of derivative product related to the good. From this perspective, this means that a convenience yield is based on actual possession, and not on owning a futures contract or some other arrangement. Owning a good may or may not actually present the most advantageous situation for an investor. However, there are certainly situations that may occur where direct ownership provides a level of benefit that could not be derived from having an option of some sort. This can be especially true when it comes to commodities. Owning goods such as basic food products can lead to a substantial convenience yield under certain circumstances. For example, owning actual bales of wheat or storehouses of corn could become highly profitable
