Commodity forward price with lease payment
I'm confused by the arbitrage formulas for commodities in Schweser
"The commodity borrower is willing to pay the lease rate = convenience yield - storage cost. The value of the forward to the commodity borrower"
F >= S * (e^ (Rf - lease rate)*T)
In the secret sauce book, it says "Treating the lease payment as a dividend (for investing in the commodity), the forward price for a commodity with an active lease market is:"
F <= S * (e^ (Rf - lease rate)*T)
This whole section is confusing to me. Can anyone explain it in the plain english? |