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What is cost and carry model in pricing commodity futures?

April 26, 2017carry commodity COST Futures model pricing

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What is cost and carry model in pricing commodity futures?

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A buyer has the choice of buying the underlying asset today in the spot Market or Holding it. If he buys today he incurs Cash outlay and storage cost. If he buys in Forward market he does not incur these costs. These are incurred by Seller who charges the buyer a price higher than spot price.